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 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.
While we believe that the New Zealand government's target for a fiscal surplus in Fiscal Year 2014/15 will not be achieved, the fiscal accounts remain in better health compared with most developed market economies. We expect the country's fiscal accounts to flip to a surplus of 0.1% of GDP in FY2015/16 (July-June) from a deficit that is equivalent to 0.2% of GDP in FY2014/15. This will be supported by continued spending restraint, which should keep government spending...
New Zealand Industry Coverage (14)
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 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. We believe prices will pick up again in 2016.
Milk production growth...
New Zealand Autos
BMI View: A slowing agricultural sector and a weakening NZD will lead to a slight reduction in the annual rate of new vehicle sales growth for New Zealand in 2016. We are targeting 3.8% sales growth for the sector as a whole, with passenger cars set to outperform commercial vehicles.
|Passenger Car And Light Commercial Vehicle Sales|
|f = BMI forecast. Source: NZTA, BMI|
Food & Drink
New Zealand Food & Drink
BMI View: We continue to forecast New Zealand's real GDP growth rate to slow to 2.4% in 2015, from an estimated 3.1% in 2014. A deteriorating outlook for the crucial dairy sector, together with an ongoing decline in construction growth should offset the positive impact of lower oil prices on growth. The agricultural sector has grown in importance over recent years, driven in large part by the dairy sector. The outlook for dairy production has worsened over recent months. Dairy farmers are facing a double spell this season, as low prices and payouts from cooperatives are concurring with drought conditions over some key producing regions, which will limit herd expansion and increase feed costs.
Headline Industry Data (local currency)
Food consumption value growth (...
New Zealand Infrastructure
BMI View: We expect New Zealand's construction sector to experience a growth slowdown in 2015, due primarily to the limited upside potential for housing demand. The country's property market is highly overvalued and the central bank has put measures in place to make it more difficult for residential developers to borrow, which should help to slow property price growth, and could trigger a 10-15% fall over the next year. This should result in the deceleration of the construction market, but growth will still remain in positive territory at CAGR 4.9% over the next five years.
Key Trends And Developments
The New Zealand Transport Agency (NZTA) has shortlisted three consortiums to build a highway linking Puhoi to Warkworth. The groups...
New Zealand Insurance
BMI View: The insurance market in New Zealand is relatively small, by global standards, and a subdued domestic economic outlook means that premiums growth in both the life and non-life sectors will be slow throughout our forecast period to 2019. The strengthening of the US dollar also means that the market will contract in USD terms in the short term. Over the longer term, demand for key non-life lines such as property and motor are likely to remain high while demand for life products (the smaller market currently...
New Zealand Medical Devices
BMI Industry View: The strengthening of the US dollar has already affected import performance from the USA, the country's main supplier, and we expect this trend to 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 2015 and beyond.
Headline Industry Forecasts
In local currency terms, the market is expected to post steady, if unspectacular, growth in the next few years. In US dollar terms, due to a strengthening dollar, we expect the market CAGR for 2014...
Oil & Gas
New Zealand Oil & Gas
BMI View: Lack of major new discoveries will see New Zealand's crude oil production remain on a firm downtrend over the next decade. This will deepen the country's dependence on imports. Natural gas production will remain largely stable, though consumption will remain capped by domestic production due to the lack of an LNG import infrastructure.
Pharmaceuticals & Healthcare
New Zealand Pharmaceuticals & Healthcare
BMI View: Over the forecast period New Zealand will continue to present a gradually deteriorating operating environment for drugmakers. Pharmac's limited and oversubscribed budget, will not allow for significant expansion in the volume and value of the pharmaceutical market as prices are held down. However, if ratified the Trans Pacific Partnership would likely place great restraints on Pharmac's ability to do so and see New Zealand's regulators forced to accept higher prices for high value pharmaceuticals and biologics. However, a rapidly ageing population and already record levels of insurance claims suggests that far greater private sector participation will be necessary to support such prices.
Headline Expenditure Forecasts
New Zealand Power
BMI View: Geothermal, wind and hydropower will be the most attractive sectors in the New Zealand power market over the coming years, in light of the government's goal to source 90% of its electricity from renewables by 2025. Thermal power capacity will decrease between 2015 and 2018 due to the retirement of several coal- and gas-fired power plants, but a limited pipeline of new renewables projects suggests the government's goal will not be met during our 10-year forecast period.
New Zealand Renewables
Non-hydropower renewables account for around 22% of total electricity generation in New Zealand. Significant investment into renewables industry over the past several years has created a situation of oversupply in the market, which, combined with slowing electricity demand, is expected to hinder further expansion of the renewables sector across our forecast period to 2024.
Key Trends And Developments
In August 2014, New Zealand-based Contact Energy opened its 166 megawatt (MW) Te Mihi geothermal plant in New Zealand. The facility comprises two 83MW steam turbines that were installed close to the 53-year-old Wairakei geothermal plant near the town of Taupo. Once the new plant is complete, some of the units at the old station will be decommissioned.
We believe that the residential solar loan programme proposed by New Zealand&#...
New Zealand Retail
BMI View: New Zealand is a highly developed country with a modern and diverse retail market. Stable growth has helped boost household incomes and this will offer retailers a number of opportunities, despite the country's comparatively small market. We are forecasting incomes to grow at 2.8% annually until 2019; however, 58.2% of spending will still go towards essential items.
New Zealand has maintained control over both domestic and regional risks over the past five years and this has helped boost the country's economic growth. Real GDP rose by 3.3% in 2014, the fastest rate since 2007, and we are expecting growth for 2015 to come in at 2.4%. We expecting annual growth to fluctuate between 2-3% until 2019 and this should cultivate stable...
New Zealand Telecommunications
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 subscriptions are forecast to rise from 5.855mn in 2014 to 6.324mn by 2019 and a high penetration rate of 132.5%. Large numbers of inactive accounts are still supported which, at...
New Zealand Tourism
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.