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.

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 still depressed 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 New Zealand government has a strong commitment in keeping expenditures in check amid weak revenue collection, and we believe that it will continue to maintain its budget surplus, which is positive for the business environment as the private sector will be less crowded out by the government. Following a better than expected outcome in FY2015/16 (July-June), we are...

New Zealand Industry Coverage (14)

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 throughout the medium-to-long term. This will be supportive for 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...

New Zealand Autos

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BMI View: Attractive auto financing rates continue to outweigh what is a fairly mixed economic outlook. We have revised up our forecast to 5.4% growth for the total sector in 2016, as commercial vehicles heavily outperform passenger cars.

Passenger Car and Light Commercial Vehicle Sales
f = BMI forecast...

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

New Zealand Food & Drink

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BMI View: A large and wealthy middle-class will support robust growth in New-Zealand's food and drink sector. Growth in the mature market will largely be supported by premiumisation as health consciousness gains mainstream awareness. The mass grocery retail sector will benefit from higher value purchases and an uptick in inflation throughout our forecast period, as these factors will provide growth impetus for sales.

Food and Drink Spending

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.


New Zealand Insurance

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BMI View: New Zealand's insurance sector is relatively small by global standards and subdued domestic economic conditions, paired with the weakening of the New Zealand dollar, means that life and non-life premiums growth (in USD terms) will only resume from 2018 onwards. Long-term growth will be driven in particular by the growing consumer awareness of benefits of life products, as well rising household disposable incomes. Across the non-life lines, demand for property and motor products should continue to remain high.

Headline Insurance Forecasts (New Zealand 2013-2020)

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.

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New Zealand Oil & Gas

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BMI View: While New Zealand will remain a net importer of crude oil to offset falling production, slowing demand will see it turn into a small net exporter of refined fuels, namely jet fuel and residual fuel oil, by 2020. The lack of any means to import gas remains a lingering concern as the country's gas output continues to decline.

Headline Forecasts (New Zealand 2014-2020)
2014 2015 2016f 2017f ...

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.

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New Zealand Power

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BMI View: New Zealand's power market is very well developed. Hydropower plants account for more than half of installed capacity and the country also makes extensive use of wind, geothermal and solar power. Thermal power is declining in importance as New Zealand phases out ageing coal-fired power plants and instead focuses new investment on the renewables sector. While New Zealand's renewable energy targets mean we do expect to see some growth in the sector over the coming years, the lack of consumption growth and limited incentives mean there are only a few major projects currently in the pipeline.

Headline Power Forecasts (New Zealand 2015-2021)

New Zealand Renewables

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BMI View: New Zealand's non-hydroelectric renewables market remains far behind its potential. Lacking demand pressures and a central government feed-in-tariff system, capacity additions are highly limited with growth of 0.1% expected for 2016 and 2017. While new impetus may come from the planned retirement of fossil fuel plants, its postponement until 2022 in combination with the absence of meaningful electricity demand growth has put new projects on the backburner.

New Zealand - Headline Renewables Forecasts
2015e 2016f ...

New Zealand Retail

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BMI View: The growth outlook for New Zealand's retail sector is mixed. On the one hand the country presents an open and attractive investment environment which will continue to draw in major global retailers, with a number of new additions to the market expected in the coming year. On the other hand, slowing economic growth will dampen household consumption growth in 2016, and the retail sector faces a challenge from the weak local currency which is dampening sales volumes in US dollar terms. Essentials spending will continue to account for the bulk of household spending, though we are seeing growth in other sectors as the retail sector diversifies and retail options are expanded.

Headline Household Spending

New Zealand Telecommunications

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BMI View : 2degrees' hasty abortion of a planned public offering reflects the challenges minor players face in expanding in New Zealand's mature and saturated telecoms market. New data from the Commerce Commission and the principal infrastructure provider Chorus show the market is gravitating towards high-bandwidth platforms such as fibre and VDSL. Consumer demand for converged services means that players must offer such services in order to remain mature. This is why Sky and Vodafone are merging. 2degrees has no such options open to it and cannot remain privately owned for long.

Mobile Saturation Evident
New Zealand Mobile Market Forecasts

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)

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