28 Jan 2016
New Zealand: Market Profile
Major Economic Indicators
- New Zealand’s economy expanded 0.9% year-on-year (YOY) in Q3 2015, after growing by 0.3% YOY in Q2 2015.
- Consumer prices rose 0.4% YOY in Q3 2015 while unemployment rate was 6% during the same quarter.
- New Zealand’s exports contracted 17.1% in the first eleven months of 2015, while imports decreased by 13.2% during the same period.
- Hong Kong’s exports to New Zealand remained stable at US$538 million in the first eleven months of 2015 compared with the year-earlier period, while imports plunged by 14.7% YOY to US$437 million.
Current Economic Situation
New Zealand is largely a service-based economy, with its service sector accounting for 70% of the country’s GDP, while the industry and agriculture sectors taking up GDP shares of 26% and 4% respectively. Major economic sectors include finance, tourism, real estate services, food processing, wool knitting.
New Zealand’s economy expanded 0.9% YOY in Q3 2015, up marginally from 0.3% YOY in the preceding quarter. Food and beverage processing, business services and tourism related industries such as transportation, retail and wholesale trading activities were the primary economic drivers for the quarter, while there was a continued GDP boost due to the rebuilding of Christchurch after the earthquakes. The IMF forecasts a growth of 2.4% in 2016 for the country.
New Zealand’s CPI in Q3 2015 rose 0.4% YOY, below the target range of 1 to 3% set by the Reserve Bank of New Zealand (RBNZ). For the labour market, unemployment rate stood at 6% in Q3 2015, compared with 5.9% in the preceding quarter. RBNZ reduced the key policy rate to 2.5% during the monetary policy meeting in December 2015.
New Zealand experienced a trade deficit of US$2.4 billion in first eleven months of 2015, with its exports contracting 17.7% YOY to US$31.2 billion and imports decreasing by 13.2% YOY to US$33.6 billion. The fall in oil prices caused a drop in exports value of crude oil and related products and outweighed the strong growth in the exports of meat and edible offal. China and Australia are the two major export markets for New Zealand.
On the other hand, imports were mainly driven by imported capital goods such as transport equipment, and consumption goods such as household appliances amid a weakening NZ dollar against the US dollar. New Zealand mainly imports from China, Australia, the US and Japan.
In the first eleven months of 2015, some 3.1 million overseas travellers visited New Zealand, a 9% YOY increase amid a weaker NZ currency and rapid growth in Chinese tourists. The robust growth of inbound tourism partially offset the sluggish export performance. The New Zealand Institute of Economic Research expects diary exports to be eclipsed by tourism as the top foreign receipts earner for the country.
New Zealand’s cumulative FDI reached US$80 billion as at end-June 2014, with the cumulative FDI of Hong Kong and the Chinese mainland in New Zealand reaching, respectively, US$3.8 billion and US$0.7 billion.
The long-term policy of New Zealand is focused on boosting both economic performance and productivity. The government’s Budget Policy Statement 2016 released in December 2015 continues support for the Business Growth Agenda, which sets out a spate of microeconomic programmes including tax reform, enhancement of labour skills and labour market flexibility, and improvement on housing supply and affordability.
New Zealand is also committed under Budget 2016 to rebuilding Christchurch and the surrounding areas as a top government priority after the earthquakes in September 2010 and February 2011. The government has so far set aside NZ$17 billion for the reconstruction of Christchurch.
New Zealand is a member of the World Trade Organisation (WTO). Its tariff schedule is based on the Harmonised System (HS) of coding while custom valuation is based on the free on board (f.o.b.) value of imported goods. Most goods can be freely imported.
The New Zealand’s government has been working on the progressive reductions of trade barriers. New Zealand's average MFN applied tariff dropped from 2.1% in 2009 to 2% in 2014. Currently, textiles, processed foods, machinery, steel, and plastic products are subject to a 5% tariff rate, while clothing, footwear and carpet are subject to a 10% tariff rate. These tariff rates will remain in force before 2017.
New Zealand has been active in pursuing free trade agreements (FTAs). FTAs have been signed with Australia, China, ASEAN, Singapore, Malaysia, Korea and Thailand. Currently, the country is pursuing FTAs with Russia-Belarus-Kazakhstan, India, and the Gulf Cooperation Council (concluded but not yet signed).
Hong Kong and New Zealand signed a Closer Economic Partnership Agreement (CEP Agreement) in March 2010 for implementation in January 2011. In particular, the CEP Agreement contains measures to improve business flows and promote cooperation in a broad range of economic areas, with some legally-binding side agreements on labour and environment. The CEP Agreement is seen as enhancing the role of Hong Kong as a platform for New Zealand doing regional business, in particular the booming market of the Chinese mainland.
The bilateral Investment Promotion and Protection Agreement (IPPA) came into force in August 1995, Hong Kong and New Zealand signed a Double Taxation Avoidance Agreement, which became effective in November 2011.
Hong Kong's Trade with New Zealand
Hong Kong's exports to New Zealand totaled US$538 million in the first eleven months of 2015, with the country being the 43rd largest export market for Hong Kong. Major export items included telecom equipment & parts (31.8% share), computers (7.8%), other articles of apparel, of textile fabrics (6.2%), Jewellery (3.3%), and perfumery, cosmetics or toilet preparations (excluding soaps) (3.2%).
Hong Kong's imports from New Zealand retreated by 14.7% to US$437 million in the first eleven months of 2015. Major import items included milk and cream and milk products other than butter or cheese (21.4% share), other meat & edible meat offal, fresh, chilled or frozen (10.9%), fruit and nuts (not including oil nuts), fresh or dried (10.4%), and sugars, molasses and honey (4.5%) and live animals (4.5%).
New Zealand's Economic Involvement in Hong Kong
According to the Hong Kong Census and Statistics Department, seven New Zealand companies had set up seven regional offices and five local offices in Hong Kong as of June 2015.
Tourists from New Zealand to Hong Kong decreased 5.7% YOY to 87,127 in the first eleven months of 2015, accounting for 0.2% of total visitors to Hong Kong.
As of end-2015, there were 2,015 New Zealand nationals residing in Hong Kong.