New Zealand

In-depth country-focused analysis on New Zealand's economic, political and operational risk environment, complemented by detailed sector insight

New Zealand

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.

Country Risk

New Zealand Country Risk

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Core Views

  • The New Zealand economy is experiencing a gradual deleveraging cycle, which will weigh on real GDP growth over the coming years. While declining oil prices will provide some support to corporate profit margins and economic activity, these positives will likely be offset by the joint deterioration in the dairy and construction sectors, which remain the two key pillars of the economy.

  • New Zealand's fiscal accounts remain in better health compared with most developed market economies. The government returned its budget to a surplus in FY2014/15, and maintained its objectives to grow the country's budget surplus and reduce debt over the coming years during its FY2016/17 budget announcement in May 2016. Given the government's continued commitment to rein in expenditures over the coming years, we expect the country's budget surplus to be...

New Zealand Industry Coverage (14)

Agribusiness

New Zealand Agribusiness

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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 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 dairy sector will suffer over the short term due to low prices on the international market, as well as herd rebuilding. We believe prices will pick up again later in 2017...

Autos

New Zealand Autos

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BMI View: The combination of a slowing economy and a weakening dollar will lead to a slowdown in growth in New Zealand's new vehicle market.

Passenger Car and Light Commercial Vehicle Sales
(2014-2020)
f = BMI forecast. Source: NZTA, BMI

Key Views

  • We maintain our forecast for 3.5% growth in total vehicle sales for 2016, supported by Q116 growth of 3.0% y-o-y.

  • Over our forecast...

Commercial Banking

New Zealand Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Food & Drink

New Zealand Food & Drink

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BMI View: New Zealand's food and drink industry will see robust growth on the back of a large and wealthy middle class that has increasing capacity to spend on premium products. Although the food and drink sectors are relatively mature, premiumisation focused on health consciousness trends will drive value growth across the board. A weak New Zealand dollar will boost the tourism sector, which will further benefit premium categories. However, we do note, weakness in the agriculture and construction sectors pose a downside risk to household spending.

Food and Drink Spending
(2013-2020)
...

Infrastructure

New Zealand Infrastructure

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BMI View: Growth in New Zealand's small construction industry should moderate over the next decade as the Christchurch rebuilding slows from its peak. An inflated housing market presents downside risks to the key residential construction sector, although the building growth remains firm, but with a possible flattening of the trend. The roads sector is booming, energy and utilities may require capacity expansion in the medium term and social infrastructure is providing several PPP opportunities.

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Insurance

New Zealand Insurance

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BMI View: We retain our view that the New Zealand insurance market is comparatively small by global standards and a subdued domestic economic outlook weighs in on premium growth prospects, in both the life and non-life sector through our forecast period out to 2020. The strengthening of the American dollar against the New Zealand dollar will also constrain dollar denominated premiums in both 2016 and 2017. We estimate that over the longer term, demand for key non-life lines, such as property and motor, will continue to remain high. However, we believe that demand for life productions, the smaller market at present, is expected...

Medical Devices

New Zealand Medical Devices

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BMI View : The strengthening of the US dollar has already affected import performance from the USA, the country's main supplier, and we maintain this trend will continue in the medium term, with a -0.6% CAGR market growth expected for the 2014-2019 period. The District Health Boards' focus on cost efficiency and a stronger policy on medical device reimbursement are likely to affect the growth prospects of the New Zealand medical device market in 2016 and beyond.

Total (USDmn) ...

Oil & Gas

New Zealand Oil & Gas

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BMI View: Falling production and steady gains in consumption will maintain New Zealand's status as a net importer of both crude oil and refined fuels over our forecast period to 2025. Low crude prices will allow the country to diversify its crude options and ease its heavy dependence on the Middle East. Gas imports remain unlikely, as a small consumer market and limited potential for large-scale consumption growth deter international investment.

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Headline Forecasts (New Zealand 2014-2020)
2014 2015 2016f

Pharmaceuticals & Healthcare

New Zealand Pharmaceuticals & Healthcare

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BMI View: New Zealand's updated Health Strategy draft will see limited improvement to the challenging business environment for innovative drugmakers. Cost minimisation continues to be a key aspect of the approach adopted, with the Pharmaceutical Management Agency maintaining its dominant role in curbing pharmaceutical spending. Nonetheless, there will be opportunities for other segments of the health industry, such as telecare, which is poised to play a critical role in enabling New Zealand to achieve its objectives.

Headline Expenditure Forecasts

  • Pharmaceuticals: NZD1.45bn (USD1.20bn) in 2014 to NZD1.48bn (USD1.04bn) in 2015; 2.0% in local currency terms and -11.4% in US dollar terms. Forecast unchanged from last quarter.

  • ...

Power

New Zealand Power

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BMI View: The power market in New Zealand is mature, with the country boasting an extensive and diversified energy supply mix comprised of hydropower, renewables and a shrinking thermal energy sector. New Zealand has committed to an ambitious renewable energy target, aiming for renewables - including hydropower - to account for 90% of electricity generated in the country by 2025. Based on the current project pipeline, we see New Zealand falling short of these targets, remaining reliant upon natural gas-fired thermal power for around 20% of electricity supplies. There is some upside risk to our current forecasts, with investment in new capacity expected to see an uptick as ageing coal-fired power plants are taken offline.

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Headline Power Forecasts (New Zealand 2015-2021)

Renewables

New Zealand Renewables

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BMI View: Non-hydropower renewable capacity and generation growth in New Zealand is forecast to remain subdued in 2016, with rates of 0.11% and 1.74% respectively. While new impetus is expected to come from the retirement of thermal power plants over the coming years, the weak project pipeline has resulted in the extension of operation of the Huntly power plant until 2022. Stronger growth in the sector is further undermined by a decreasing energy demand and the lack of a governmental subsidy scheme supporting...

Retail

New Zealand Retail

BMI View:

BMI View: New Zealand's mature retail sector will continue to attract major global retailers, keen to take advantage of an affluent and urbanised population. However, in the short term the industry is facing challenges as a result of the weak local currency, which is dragging down retail sales in US dollar terms. Over our forecast period the lion's share of retail spending will continue to go on essential items - particularly food and drink, housing and transport - although there are also opportunities elsewhere in the market, with new retail developments seeking to attract international fashion retailers in particular.

Headline Household Spending
(2014-2020)
...

Telecommunications

New Zealand Telecommunications

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BMI View : Efforts to roll-out wireline and mobile broadband infrastructure and services, including to a large proportion of underserved rural areas, will drive growth of New Zealand's telecoms market in the medium term. This will benefit the service provider sector as new customers are hard to come by and there is little more to be done in upselling premium services. The infrastructure aspect will prove most challenging as consumers will be slow to take full advantage of 3G/4G and fibre networks. Consolidation will continue as operators seek to tap into new markets.

Mobile Market Saturation Points Provide Opportunities In Multi-Play
New Zealand Mobile Market Forecasts
...

Tourism

New Zealand Tourism

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BMI View: New Zealand's tourism industry is growing rapidly, supported by extensive government investment in both transport infrastructure and the accommodation sector, and visitor numbers are increasing steadily. A high degree of openness to foreign investment and the expanding inbound and domestic tourism markets are attracting various regional and international hotel developers, and a number of hotel projects are in the pipeline. As a long-haul destination for the vast majority of potential source markets, getting to New Zealand can be prohibitively expensive. Over the longer term, expansion of regional and international air travel connections will be vital to the sustainability of tourism growth.

Key Forecasts (New Zealand 2012-2019)
2012...

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