Historically New Zealand enjoyed a high standard of living which relied on its strong relationship with the United Kingdom, and the resulting stable market for its commodity exports. New Zealand's economy was also built upon on a narrow range of primary products, such as wool, meat and dairy products. High demand for these products - such as the New Zealand wool boom of 1951 created sustained periods of economic prosperity. However, in 1973 the United Kingdom joined the European Community which effectively ended this particularly close economic relationship between the two countries. During the 1970's other factors such as the oil crises undermined the viability of the New Zealand economy; which for periods before 1973 had achieved levels of living standards exceeding both Australia and Western Europe. But these events led to a protracted and very severe economic crisis, during which living standards in New Zealand fell behind those of Australia and Western Europe, and by 1982 New Zealand was the lowest in per-capita income of all the developed nations surveyed by the World Bank.

Since 1984, successive governments have engaged in major macroeconomic restructuring, transforming New Zealand from a highly protectionist and regulated economy to a liberalised free-trade economy. These changes are commonly known as Rogernomics and Ruthanasia after Finance Ministers Roger Douglas and Ruth Richardson. A recession began after the 1987 share market crash and caused unemployment to reach 10% in the early 1990s. However the economy recovered and New Zealand’s unemployment rate is now the second lowest of the twenty-seven OECD nations with comparable data (3.7%).
The current government's economic objectives are centred on pursuing free-trade agreements and building a "knowledge economy". In 2004, the government began discussing a free trade agreement with the People's Republic of China, one of the first countries to do so. Ongoing economic challenges for New Zealand include a current account deficit of 8.2% of GDP, slow development of non-commodity exports and tepid growth of labour productivity. New Zealand has experienced a series of "brain drains" since the 1970s as well educated youth left permanently for Australia, Britain or the United States. "Kiwi lifestyle" and family/whanau factors motivates some of the expatriates to return, while career, culture, and economic factors tend to be predominantly 'push' components, keeping these people overseas.In recent years, however, a brain gain brought in educated professionals from poor countries, as well as Europe, as permanent settlers.