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
The free trade agreement (FTA) between New Zealand and South Korea is set to be ratified by Q115, subject to parliamentary approval, and will provide significant benefits to New Zealand's meat and dairy exports. Additionally, recued import tariffs on consumer gods should support real incomes, helping to offset the impact of weakening terms of trade and a depreciating currency.
We are beginning to see signs of a slight slowdown in the New Zealand economy. The crucial agricultural sector is cooling, while the services and construction sectors are currently the only drivers of growth, leaving the economy susceptible to weakness in the New Zealand dollar and the property market.
Our contrarian view of a no further interest rate hikes by the Reserve Bank of New Zealand (RBNZ) until 2016 is gaining credence as consensus expectations...
New Zealand Industry Coverage (11)
New Zealand Agribusiness
BMI View: 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. 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. 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
In 2014, there were a total of 127,179 new vehicles sold in New Zealand, representing an increase of 12% y-o-y, according to figures from New Zealand's Motor Industry Association (MIA). This represented the best-ever year for new vehicle sales in New Zealand and bears out BMI's optimism on the market.
According to the CEO of the MIA, David Crawford, this strong sales performance reflected 'the strong New Zealand economy, competitive pricing made possible by the relative strength of the New Zealand dollar and a wide range of new models introduced during the year'. According to Crawford, 2014 was the best year for new vehicle sales since 1984 'when 123,247 new vehicles were registered'.
Breaking down the headline figure, there were a total of 90,517 passengers car sold (+10%) and 36,622 commercial vehicles sold (+19%). This was in line with BMI's view that CV sales would...
Food & Drink
New Zealand Food & Drink
BMI View: We maintain a largely positive outlook for New Zealand's food and drink industry as the stable economic environment, increasing private consumption and improving labour market will sustain healthy sales growth in the food, drink and mass grocery retail sectors over our forecast period to 2018.
Headline Industry Data (local currency)
Food consumption value (local currency) growth (y-o-y) in 2014: +5.4%; compound annual growth rate (CAGR) 2013-2018: +6.0%.
Per capita food consumption value (local currency) growth (y-o-y) in 2014: +4.3%; CAGR 2013-2018: +5.0%.
Alcoholic drinks value (local currency) sales growth (y-o-y) in 2014: +5.6%; CAGR 2013-2018: +6.%.
Soft drinks value (local currency) sales growth (y-o-y) in 2014: +7.6...
New Zealand Infrastructure
BMI View: 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 Contractors is approximately AUD800mn...
New Zealand Insurance
BMI View: The New Zealand insurance sector is relatively mature with a plethora of international firms, many of them Australian-owned, as well as a number of smaller local players leaving relatively little space for new entrants. That said, there is scope for growth in certain areas of the market, not least property insurance which remains an important area of the wider non-life segment given the country's vulnerability to earthquakes and other forms of natural disaster. Meanwhile, the life insurance sector, though undeveloped by international standards, may offer opportunity for new and existing players owing to the low level of penetration among the local population.
We expect the short-term outlook to remain challenging for insurers operating in the New Zealand market....
New Zealand Medical Devices
BMI 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. BMI estimates the CAGR for 2013-2018 to be 3.7%. This will take the...
Oil & Gas
New Zealand Oil & Gas
BMI View: Over the last quarter much of the oil and gas activity has been onshore, though offshore drilling may now pick up as we enter the summer drilling season. Redevelopment projects are forecasts to return oil production to growth over 2015, driven by the completion of the Maari growth project. Long-term hydrocarbon potential remains strong with 18 under explored sedimentary basins outside of the producing Taranaki basin, though exploration will likely progress slowly.
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 run.
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
BMI View: We are forecasting healthy and sustained growth across a range of key indicators in New Zealand's tourism market. Benefiting from high profile and consistent marketing campaigns targeting key growth markets, inbound arrivals are increasing steadily which will provide a boost for tourism related expenditure in the country. At the same time, domestic economic growth is supporting a slight expansion of New Zealand's outbound travel market.
New Zealand is actively pursuing growth in arrivals from key markets in the burgeoning Asia Pacific region. The tourism body Tourism New Zealand has been working with travel companies in South Korea and China to increase tourism, and has also appointed a new creative advertising agency specifically to target growth in tourism from Indonesia. This reflects the importance of...