The article explains why a ‘Third Way’ for economic management has become important in New Zealand. Economic growth fell sharply compared to Australia after 1984, due to a slow-down in New Zealand's labour productivity growth after 1991. The paper argues this was partially the result of a neglected aspect of economic management during the 1984–94 decade of economic reform: fostering domestic physical capital formation. The third way differs from both the approach adopted prior to 1984 and the approach adopted during New Zealand's reforms, based on government involvement, but not direct intervention, in industry and regional development.
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