Booming pastoral economy
In the early 20th century private investment was driven by population growth and changing economic opportunities.
The development of refrigerated shipping from the 1880s encouraged meat and dairy production, and as commodity prices rose from the mid-1890s there was investment in new stock and processing equipment. In periods when prices paid for agricultural output were especially high, such as during the First World War, there was an incentive to increase production. So investment rose in land improvements, farming stock and agricultural machinery.
Mining and forestry
The dredging boom prompted investment in dredges, crushing machinery and electrification. Coal mines and their related infrastructure were developed to provide fuel for shipping and rail as well as households.
As the area in native forest steadily diminished, from the 1910s both private and public investment occurred in exotic tree planting.
The ongoing growth in population prompted investment in residential accommodation, particularly in the rapidly growing cities in the North Island – from 1911 more New Zealanders lived in urban than in rural areas.
Volatility between the wars
A sharp depression following the First World War affected the farming sector and depressed investment levels in the early 1920s. By 1923 investment had resumed.
Through the three decades before 1930, two new forms of energy, oil and electricity, prompted investment. Investment in trucks, buses, petrol storage tanks and service stations created a new ‘oil’ economy. Investment in electrical energy included hydroelectric power stations, the reticulation of electricity to rural areas and the electrification of industrial plants.
Investment collapsed again in the world-wide depression of the 1930s. This had a major negative effect on the level of investment. Private house building was drastically reduced.
There was some investment in public works schemes, established to keep the unemployed busy and reduce the risks of domestic unrest. But this spending was modest compared to the end of investment on railways, and sharp cutbacks on road building, public buildings and hydroelectric development. Public works expenditure, over £8 million in 1930–31, was less than £2 million in 1932–33.
Public investment, 1935–39
The use of public works to stimulate the economy was boosted by the election of the first Labour government in 1935, and public investment reached over £10 million annually by 1938–39. But the government was facing financial difficulties.
The Second World War led to new investment in defence. But if war had not intervened the government would have had to curtail public works spending, and probably private investment, to help improve the balance of payments – more money was being spent overseas than was earned through exports.