Our comprehensive assessment of New Zealand's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect New Zealand, as well as the latest industry developments that could impact New Zealand's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in New Zealand before your competitors.
New Zealand Country Risk
New Zealand's economic performance remains on a stable trend, with indicators showing that the manufacturing and services sectors remain firmly in expansion. We maintain that the pace of expansion will remain broadly the same as 2013, with just a slight acceleration to 2.7% in 2014 from 2.5% previously. Interest rate hikes, together with export performance moderating in Q314, should cap upside potential of the economic growth.
While we had originally held the view that the Reserve Bank of New Zealand (RBNZ) will hold its official policy rate at 2.75%, intensifying price pressures and strong economic indicators have led us to revise up our rate forecast to expect another 25 basis points. This would bring our forecast for the official cash rate to hit 3.00% by end-2014. Accordingly, we maintain that the next rate hike will be largely pre-emptive in nature, in...
New Zealand Industry Coverage (11)
New Zealand Agribusiness
BMI View: Â We believe that increased access to international markets, particularly Taiwan and China, will prove to be the prime growth driver for the agribusiness sector in New Zealand over the medium- to long term. Â This will be supportive for both the dairy and the livestock segments. The dairy sector in particular will benefit from export demand growth, as many other countries in Asia are facing growing domestic demand and relatively limited production capacity.Â However, the outlook for the sector is weak for 2014/15. We forecast milk production to grow by a weak 1.8% year-on-year (y-o-y) to 21.4mn tonnes, compared with the 4.0% growth recorded in 2013/14 and the five-year growth average of 4.3%....
New Zealand Autos
New Zealand's new vehicle sales market continues to strengthen. Over 9M14, total of 66,789 new passenger cars and sports utility vehicles (SUVs) were sold, plus a further 27,694 commercial vehicles (CVs), to produce a total new vehicle sales market total of 94,559 units, according to figures from New Zealand's Motor Industry Association (MIA). On current sales trends, this puts the country well on course to meet BMI's target of 124,850 units for the full year.
Looking specifically at September's figures, passenger vehicle sales were up 15.3% y-o-y, at 8,382 units, while CV sales were up 23.5% y-o-y, at 3,458 units. The CEO of the MIA, David Crawford, said this was 'the strongest September result since the MIA started collecting records in 1975'. Certainly, it appeared that New Zealanders were happy to keep spending during the pre-election period, with Prime Minister John Key being returned for a third term in office at...
Food & Drink
New Zealand Food & Drink
BMI View: Â We maintain that the pace of private consumption growth, which came in at 3.4% for 2013, is likely to moderate. Indeed, we believe that higher interest rates will weigh on consumption growth, offsetting most of the positive impact from the improvements in the job market and real wage growth. That said, we note that greater inward migration into New Zealand, which hit a 10-year high in February, could lift private consumption growth beyond the 2.1% we expect in 2014.
Headline Industry Data (local currency)
2014 per capita food consumption = +4.4%; forecastÂ compound annual growth rate to 2018 = +5.0%
2014 mass grocery retail sales = +5.5%; forecast CAGR to 2018 = +6.2%
Key Industry Trends and Developments...
New Zealand Infrastructure
BMI View: Â We expect New Zealand's construction sector to experience a growth slowdown in 2015. This is due to the limited upside potential for housing demand and the increasingly unconducive monetary environment for construction activity. This however, does not mean the dearth of growth opportunities in the country as there remain several positive drivers for construction activity.
Key Trends And Developments
In July 2014, Leighton Contractors, as part of the Wellington Gateway Partnership (WGP), reached financial close for the NZD1bn Transmission Gully Motorway public-private partnership project. WGP will finance, design and build the project, and then operate and maintain the 27km Transmission Gully Motorway from 2020 for a period of 25 years. The contract value to Leighton...
New Zealand Insurance
KIMADIA is the State Company for Marketing Drugs and Medical Appliances, which operates under the Ministry of Health. KIMADIA is in charge of the registration and authorisation of medical products, as well as tenders for medical equipment.
New Zealand Medical Devices
BMI Industry View: Â The New Zealand medical device market is expected to expand at a steady Â 3.7 % in the medium term, supplied mainly by imports, which continue to make up nearly all of the market. The small but growing local medical device industry continues to produce mainly for export worldwide thus maintaining the country's reliance on imported goods. With one of the smallest populations in the Asia Pacific region, growth is constrained, but a highly developed healthcare system means per capita spending remains amongst the highest worldwide, similar to the UK.
Headline Industry Forecasts
The market is expected to post steady, if unspectacular, growth in the next few years. BMI estimates the...
Oil & Gas
New Zealand Oil & Gas
BMI View: Â Limited domestic market opportunities, high costs and harsh offshore conditions have kept major oil and gas companies away from New Zealand's upstream. However, with the advent of improved offshore technology, including floating liquefied natural gas, significant interest has returned to the country. The 2013/2014 summer drilling season was among the busiest in New Zealand's history, though exploration in the deepwater basins failed to produce the desired results. Nevertheless, strong interest from major international oil companies in New Zealand's underexplored frontier basin remains and we expect exploration to continue over the coming years.
Pharmaceuticals & Healthcare
New Zealand Pharmaceuticals & Healthcare
BMI View: With New Zealand ' s population ageing rapidly, underlying demand for health services and pharmaceuticals is high for the region and will continue to grow. However, overburdened public sector finances and low levels of private insurance coverage suggest that gaps in funding and reimbursement will continue to limit access for innovative treatments and services, offering low near term opportunities. However, novel approaches to treatment and insurance, centred on primary care and preventative medicine, will begin to improve prospects in the long Â run. Â
Headline Expenditure Forecasts
Pharmaceuticals : NZD1.42bn (USD1.17bn) in 2013 to NZD1.46bn (USD1.10bn) in 2014...
New Zealand Telecommunications
BMI View : New Zealand's telecommunications market is small and well-developed but quite mature and suffers from a high degree of saturation, particularly in the voice and basic mobile services markets. The broadband market is somewhat under-developed, which is not surprising given that a large proportion of the population is scattered across difficult terrain; operators have not found it cost-effective to push networks out beyond the principal towns and cities. Two ambitious broadband development programmes are underway and are only just beginning to deliver results. The larger project demanded the separation of the incumbent into discrete service and infrastructure companies, but the government's laudable pursuit of affordability for all is putting the infrastructure business under severe financial pressure and undermines the state's goal of becoming a fibre nation. Meanwhile, 4G mobile broadband services are beginning...
New Zealand Tourism
The New Zealand tourism report looks at a range of key indicators in this small but expanding tourism market in the remote corner of the Asia Pacific region. Arrivals to New Zealand increased in 2013 and are expected to rise in 2014 as well; we expect this growth trend to continue through the forecast period as the country raises its global profile and improves its international travel connections. The outbound travel market isn't far behind, with similar growth expected by 2018, creating a very healthy potential investment environment.
Both the inbound and outbound tourism markets are dominated by countries within the Asia Pacific region, which account for around two-thirds of visitors and departing tourists. Australia is the most popular country for visitors from New Zealand, and also takes the top spot in terms of arrivals due to the geographical proximity, range of travel connections and cultural/historical ties. Other popular...