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

New Zealand Industry Coverage (13)

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 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.

Key Trends

  • Milk production growth to 2018/19: 9.1% to 23.7mn tonnes. Given the small domestic consumption base and the high productivity of the sector, long-term expansion...

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Autos

New Zealand Autos

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New Zealand auto sales continue to power ahead, in line with BMI's optimistic stance towards the local sales market. Looking at sales trends for Q115, a total of 33,276 new vehicles were sold in New Zealand, representing an increase of 7.8% year-on-year (y-o-y), according to figures from New Zealand's Motor Industry Association (MIA).

Breaking down the headline figure, there were a total of 13,503 passengers cars sold (-0.7%), 10,469 SUVs (+14.3%), 7,948 LCVs (+15.7%), 1,134 HCVs (2.4%) and 195 'Other' vehicles (+29.1%). These sales figures are very much in line with BMI's view that CV sales will outstrip PC sales over 2015. Considering the month of March, this was the strongest March for new vehicle sales since 1984 according to the MIA.

For 2015, we are targeting sales growth for the overall new vehicle sales market of 6.6%. CV...

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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

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Food & Drink

New Zealand Food & Drink

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BMI View: We continue to forecast New Zealand's real GDP growth rate to slow to 2.4% in 2015, from an estimated 3.2% 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 in the ongoing 2014/15 season, ending in May, has worsened over recent months. Production of value-added products, including whole milk powder, butter and cheese, will also slow down following strong growth recorded over recent years.

Headline Industry Data (local currency)

  • Food consumption value growth (y-o-y) in 2015: +5.3%; compound annual growth rate (CAGR) 2014-2019: +5.8%.

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Infrastructure

New Zealand Infrastructure

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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, should help to slow property price growth, and could trigger a 10-15% fall over the coming year. This should result in the deceleration of the construction market, but the growth will still remain in positive territory at CAGR 4.9% over the next five years.

Key Trends And Developments

  • In response to the growing housing market risk due to the rapid increase in Auckland's property prices, the regulator announced two measures on May 13 in an attempt to moderate prices. The first policy is targeted and...

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Insurance

New Zealand Insurance

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BMI View: In 2015 and 2016, the weakness of the NZD will cause premiums in New Zealand's insurance sector to fall in USD terms. Over the medium and long term, premiums in both major segments are expected to expand by around 3-4% annually. In neither case is there a clear catalyst for rapid growth. Some life insurers will benefit from the further development of KiwiSaver products.

Insurance is socialised in New Zealand to a much greater extent than in other comparable countries. In the life segment, the insurers have had to contend with the widespread (if incorrect) view held by New Zealanders that the universal old aged pension paid by the government to people who are aged 65 or over is sufficient for retirement needs. The government has countered...

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Medical Devices

New Zealand Medical Devices

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BMI Industry View: The District Health Boards' focus on cost efficiency and a stronger policy on medical device reimbursement is likely affect the growth prospects of the New Zealand medical device market in 2015 and beyond. 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.

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 market to USD1,008.0mn by 2018, equal to USD213 per capita. The orthopaedics &...

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Oil & Gas

New Zealand Oil & Gas

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BMI View: Production from redevelopment of existing fields will drive a short-term peak in oil and gas production, though over the mid-term decline is inevitable. The country's lack of liquefied natural gas (LNG) infrastructure impedes gas consumption growth, only allowing it to consume as much as it produces. Nevertheless, long-term hydrocarbon potential remains strong with 18 underexplored sedimentary basins outside of the producing Taranaki Basin.

Headline Forecasts (New Zealand 2013-2019)
2013 2014e 2015f ...

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Pharmaceuticals & Healthcare

New Zealand Pharmaceuticals & Healthcare

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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

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Renewables

New Zealand Renewables

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Renewables (including hydro power) make up a dominant share in New Zealand's electricity generation and capacity mix. Significant investment into the 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...

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Retail

New Zealand Retail

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BMI View: As a highly developed country, New Zealand has a diverse retail market. High household incomes allow a wide range of retailers to offer innovative solutions and benefit from large consumer spending. Incomes are projected to grow at 2.8% annually on average until 2019 and a rising population will expand the consumer base, however, the market's high maturity will lead to more consolidation.

New Zealand managed to control domestic and regional risks in the last five years, recording healthy growth of economic output. Real GDP rose by 3.3% in 2014, the fastest rate since 2007 when the economy grew by 3.7%. The 2011 earthquake in Christchurch has demanded vast economic resources, which are estimated...

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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 new 3G/4G and fibre networks. Consolidation will continue as operators seek to tap into new markets.

Key Indicators

  • Mobile subscriptions are forecast to rise from 5.855mn in 2014 to 6.324mn by 2019 and a very high penetration rate of 132.5%. Large numbers of inactive accounts are still supported which, at some point in the future, will have...

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Tourism

New Zealand Tourism

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BMI View: The New Zealand tourism report looks at a range of key indicators in this developing market, including the expected growth in inbound and outbound travel and the potential for growth in tourism-related expenditure and hotel industry value. Despite its remote location, New Zealand is actively promoting itself on the global tourism stage, and a gradually expanding network of airline connectivity is making the country increasingly accessible for tourists and investors alike.

Australia remains the key source market for tourist visitors to New Zealand - with travel between the two countries benefiting from affordable air travel connections between key cities in both countries. Arrivals from other Asia Pacific countries are increasing rapidly and New Zealand is keen to attract more affluent and high-...

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