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.
New Zealand's fiscal accounts remain in better health compared with most developed market economies. The government posted a budget surplus equivalent to 0.3% of GDP for FY2014/15 (July-June), fulfilling its promise made in 2011 to return the government's accounts to positive territory by FY2014/15. We expect the country's fiscal surplus to continue growing over the coming years, and this will be supported by continued spending restraint, which should keep...
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 to 2018/19: 3% to 23....
New Zealand Autos
BMI View: We continue to believe that a combination of a slowing agricultural sector and a weakening New Zealand dollar will lead to a slight slowdown in New Zealand's new vehicle sales market in 2016. We are targeting 3.5% sales growth for the sector as a whole in 2016, down slightly from our forecast of 3.8% growth last quarter.
|Passenger Car and Light Commercial Vehicle Sales|
|f = BMI forecast. Source: NZTA, BMI|
New Zealand Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Food & Drink
New Zealand Food & Drink
BMI View: New Zealand's Q215 real GDP growth figures showed that the economy remained weak, and we maintain our below consensus growth forecast of 2.4% and 2.5% for 2015 and 2016 as the dairy sector continues to suffer from depressed milk prices, while construction growth slows. This will provide challenges to the wider consumer sector.
Headline Industry Data (local currency)
Food consumption value growth (y-o-y) in 2015: +4.4%; compound annual growth rate (CAGR) 2014-2019: +5.3%.
Per capita food consumption value growth (y-o-y) in 2015: +3.3%; CAGR 2014-2019: +4.3%.
Alcoholic drinks value sales growth (y-o-y) in 2015: +4.5%; CAGR 2014-2019: +5.4%.
Soft drinks value sales growth (y-o-y) in 2015: +6.1%;...
New Zealand Infrastructure
BMI View: Growth in New Zealand's small construction industry is expected to have slowed in 2015, following a strong 2014. An overheating housing market presents downside risks to residential construction, while tightened public purse strings will constrain infrastructure investment elsewhere. The industry will, however, settle into a more sustainable but moderated growth rate over our 10-year forecast period, driven by major road projects and social infrastructure PPPs.
Latest Updates And Structural Trends
After reasonably strong growth in the previous decade, the construction industry will moderate between 2015-2024. Construction industry growth will come in at 2.7% in 2015 to NZD14.9bn (USD10.7bn) and average 3.1% annually out to 2024.
Rebuilding Christchurch after the 2010-2011 earthquakes will...
New Zealand Insurance
BMI View: The New Zealand insurance market is relatively small by international standards and a subdued domestic economic outlook weighs in on premium growth in both the life and non-life sector alike throughout our forecast period to 2020. The strengthening of the American dollar also means that the market will contract in 2016 once again sharply in dollar denominated terms. 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) is expected to grow...
New Zealand Medical Devices
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.
Oil & Gas
New Zealand Oil & Gas
BMI View: Limited scope for new oil and gas will maintain the long-term downtrend in New Zealand's hydrocarbon production over the next 10 years. Declining gas production is a particular concern as the country does not have any gas import infrastructure to make up for diminishing local volumes via imports. New Zealand will remain a net importer of crude oil owing to falling domestic production, a slowdown in exploration due to low oil prices and rising run rates at its refinery.
Pharmaceuticals & Healthcare
New Zealand Pharmaceuticals & Healthcare
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....
New Zealand Power
BMI View: The announcement that New Zealand could face energy security risks if new capacity is not installed before 2019 supports our view that new gas-fired and wind power capacity will be developed over the coming years. Uncertainty over the potential retirement of the Tiwai Point aluminium smelter over the coming five years is the main risk to investing in new power plants in the market, as a drop in power demand would strand new power-generating capacity.
New Zealand Renewables
BMI View : Investment in the New Zealand renewables sector could see new momentum over the coming quarters as a result of the retirement of several thermal power plants between 2015 and 2018. Uncertainty over future power demand - which could result in stranded assets - represents the biggest obstacle to new investment in the sector.
New Zealand Retail
BMI View: New Zealand will see positive, but not spectacular growth in the retail sector in local nominal currency terms as the economy continues to grow at a reasonable pace. However, because of expected weakness for the New Zealand dollar, the sector will contract substantially in US dollar terms. Currency weakness bodes well for tourism and, by extension, the hotel and restaurant sub-sectors. It also means that New Zealand consumers will be less inclined to travel and will instead spend money on consumer goods and services at home.
|Headline Household Spending|
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 Market Saturation Points Provides Opportunities In Multi-Play|
|New Zealand Mobile Market Forecasts|
New Zealand Tourism
BMI View: Tourism in New Zealand is experiencing strong growth. Tourist arrivals are increasing rapidly; regularly hitting record numbers, and fuelling high demand for accommodation and leisure services. Indeed, in some, particularly popular tourist destinations, resources are being so stretched that towns are experiencing water shortages and overcrowded roads. This growth in inbound tourism is, however, set to continue throughout the forecast period and requires strong investment in both travel infrastructure and the management of natural resources. Despite a strong presence from some of the major international hotel chains, there is significant opportunity for development in the mid-range sector and a number of domestic and international companies have major projects in the pipeline.