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 new vehicle sales have performed strongly across H114. A total of 44,326 new passenger cars were sold over the Jan-Jun period, plus a further 17,887 commercial vehicles (CVs), to produce a total new vehicle salesÂ market total of 62,213 units, according to figures from New Zealand's Motor Industry Association (MIA). For the full year, BMI is targeting growth of just under 10%, to reach 123,646 units, which looks achievable on current sales trends.
Looking specifically at June's figures, passenger car sales were up 13% year-on-year(y-o-y), at 8,517 units, while CV sales were up 17% y-o-y, at 4,002 units. The CEO of the MIA, David Crawford, pointed out that the registration of 4,002 new CVs was not only the strongest June sales performance since the MIA began collecting records for commercial vehicles in 1981, but also 'the strongest month of any monthly commercial sales'. Crawford attributed the strong sale...
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
BMI View: Both the life and non-life segments of New Zealand's insurance industry continue to produce results which do not inspire much confidence for the future. In terms of the life markets premium growth remains fairly flat although profits have been driven by non-insurance based activity. In terms of the non-life market there is still adverse ripple effects being felt from 2011 Christchurch/Canterbury earthquakes and 2013 weather effects which pushed up reinsurance costs. In both life and non-life markets the poor results stimulated a number of changes in the competitive environment including a number of large scale acquisitions in which larger firms aim to achieve greater economies of scale in the long run ....
New Zealand Medical Devices
Espicom Industry View: The New Zealand medical device market is expected to expand at a steady 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. Espicom estimates the CAGR for 2013-2018 to be 3.7%. This will...
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: L imited pharmaceutical reimbursement in New Zealand will remain a key issue for innovative pharmaceutical firms as the country seeks to maintain tight control over pharmaceutical spending. Between 2013 and 2018, BMI forecasts that pharmaceutical sales in New Zealand will grow at a local compound annual growth rate (CAGR) of 2.7% (-0.5% in US dollar terms).
Headline Expenditure Forecasts
Pharmaceuticals : NZD1.42bn (USD1.17bn) in 2013 to NZD1.46bn (USD1.10bn) in 2014; +2.8% in local currency terms.
Healthcare: NZD21.75bn (USD17.83bn) in 2013 to NZD22.33bn (USD18.36bn) in 2014; +2.7% in local currency terms.
Risk/Reward Rating: New Zealand's...
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
BMI is forecasting healthy growth over our forecast period to 2018 across a range of key market indicators for New Zealand's burgeoning tourism industry. Arrivals have recovered well from a decline in 2012 and are expected to gain substantial ground to 2018. At the same time, an improving domestic economic environment is providing a boost to the outbound travel sector and is also generating investment capital for a range of infrastructure improvement projects that will benefit tourism in the short and long term.
The growth in tourism is expected to be driven largely by the expansion of inbound arrivals. New Zealand has no shortage of tourist attractions, with visitors drawn to the mountain ranges, which are year-round holiday destinations; the picturesque coastlines; and attractive metropolitan cities. New Zealand is also building its reputation as a sporting destination through high-profile events such as the Rugby...