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New Zealand: Market Profile

Graph: New Zealand factsheet
Graph: New Zealand factsheet

1. Overview

New Zealand has an open, transparent economy where businesses and investors can generally make commercial transactions with ease. Major political parties are committed to an open trading regime and sound rule of law practices. Strong economic growth is largely driven by tourism, private consumption and construction activity. New Zealand is likely to remain one of the most stable states in the world over the coming decade. In the realm of foreign policy, New Zealand is likely to continue relying on Australia.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

December 2016
Bill English became prime minister following the resignation of John Keys.

May 2017
A New Zealand-American company, Rocket Lab, launched its first test rocket into space, ushering New Zealand into the select group of countries which have carried out a space launch.

October 2017
There were inconclusive parliamentary elections. The Labour Party formed a coalition government with Jacinda Arden as prime minister.

April 2018
The hourly minimum wage was increased by 5%, effective April 1, 2018.

Source: BBC country profile – Timeline

3. Major Economic Indicators

Graph: New Zealand real GDP and inflation
Graph: New Zealand real GDP and inflation
Graph: New Zealand GDP by sector (2015)
Note: 2015 is latest data available
Graph: New Zealand GDP by sector (2015)
Note: 2015 is latest data available
Graph: New Zealand unemployment rate
Graph: New Zealand unemployment rate
Graph: New Zealand current account balance
Graph: New Zealand current account balance

e = estimate, f = forecast
Sources: International Monetary Fund, World Bank, Fitch Solutions
Date last reviewed: October 5, 2018

4. External Trade

4.1 Merchandise Trade

Graph: New Zealand merchandise trade
Graph: New Zealand merchandise trade

Sources: WTO, Fitch Solutions
Date last reviewed: October 5, 2018

Graph: New Zealand major export commodities (2017)
Date last reviewed: October 18, 2018
Graph: New Zealand major export commodities (2017)
Date last reviewed: October 18, 2018
Graph: New Zealand major export markets (2017)
Date last reviewed: October 5, 2018
Graph: New Zealand major export markets (2017)
Date last reviewed: October 5, 2018
Graph: New Zealand major import commodities (2017)
Date last reviewed: October 18, 2018
Graph: New Zealand major import commodities (2017)
Date last reviewed: October 18, 2018
Graph: New Zealand major import markets (2017)
Date last reviewed: October 18, 2018
Graph: New Zealand major import markets (2017)
Date last reviewed: October 18, 2018

Sources: Trade Map, Fitch Solutions

4.2 Trade in Services

Graph: New Zealand trade in services
Graph: New Zealand trade in services

Source: WTO
Date last reviewed: October 5, 2018

5. Trade Policies

  • New Zealand has been a member of the World Trade Organization (WTO) since January 1, 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since July 30, 1948.

  • New Zealand and Australia trade through a Closer Economic Relationship (CER), which is a free trade agreement (FTA) eliminating all tariffs between the two countries. However, the rules of origin under the CER do not permit products to enter Australia duty free from New Zealand unless the products are of at least 50% New Zealand origin. Additionally, the last manufacturing process must be carried out in New Zealand. The enactment of the FTA between Australia and the United States in 2005 removed any tariff disadvantage to firms that choose to re-export products from New Zealand to Australia.

  • The vast majority of New Zealand's agricultural production is exported and no export subsidies are provided for agricultural products.

  • In May 2018 the government sought feedback on a proposal to introduce goods and services tax (GST) on the importation of low-value goods. The proposal would require offshore suppliers of goods supplied to New Zealand consumers to charge and remit GST on goods valued at less than NZD400. Offshore suppliers supplying a total value of goods and services to New Zealand consumers above NZD60,000 in a 12-month period would be required to register for GST purposes. Consultation is currently underway, with the changes expected to be introduced to Parliament before the end of 2018 and effective from October 2019.

Sources: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) could add between USD1.2 billion and USD4 billion to New Zealand's economy once fully implemented, according to government sources.

6.2 Multinational Trade Agreements

Active

  1. The Association of South East Asian Nations (ASEAN)-Australia-New Zealand Free Trade Area (AANZFTA): The AANZFTA came into force on January 1, 2010. AANZFTA is a comprehensive and single-undertaking FTA that opens up and creates new opportunities for the almost 700 million people of ASEAN, Australia and New Zealand. Through AANZFTA, tariffs will be progressively reduced and eliminated for at least 90% of all tariff lines by 2020. The movement of goods will be facilitated via simplified customs procedures and barriers to trade in services will be liberalised. New Zealand's major exports to ASEAN consist of dairy products (milk powder, butter and dairy spreads and cheese) while imports are largely crude and non-crude petroleum oils, biodiesel and commercial vehicles.

  2. New Zealand-Australia: New Zealand and Australia trade through a CER, which is an FTA eliminating all tariffs between the two countries. The CER came into force in January 1983. All tariffs and quotas were eliminated by 1990, five years ahead of schedule. New Zealanders and Australians are free to visit, live and work in each other's country under the Trans-Tasman Travel Arrangement. Furthermore, New Zealand and Australia have committed to creating a seamless trans-Tasman economic environment, making it as easy for New Zealanders to do business in Australia as it is to do business in and around New Zealand. This is known as the single economic market, and builds on the foundation of the CER agreement.

  3. New Zealand-China: The FTA between New Zealand and China came into effect on October 1, 2008. Since the FTA was signed, goods exports to China quadrupled. The FTA allows for duty free access for 96% of the categories of goods New Zealand exports to China. This represented about NZD115.5 million in annual savings to exporters at the time of signing, though these savings have substantially risen as trade has increased. New Zealand's major exports to China are dairy products, wood products and meat, while imports consist of electronics, clothing, furniture and toys. In November 2016, it was decided to upgrade the FTA, with the aim of increasing two-way trade to USD30 billion by 2020.

  4. New Zealand-Singapore: New Zealand and Singapore trade through a Closer Economic Partnership (CEP), which came into force on January 1, 2001 (less than a year after initial negotiations started) and covers both goods and services. Goods made in New Zealand or Singapore can be traded between the two countries duty free. In 2017, Singapore was the source market for 3.4% of New Zealand's imports and accounted for 2.1% of total exports. Singapore is also the base of many New Zealand businesses operating in South East Asia. In April 2017, the New Zealand and Singaporean foreign ministers announced that negotiations for an upgraded New Zealand-Singapore Enhanced Partnership would begin.

  5. New Zealand-Malaysia: The New Zealand-Malaysia FTA came into effect in August 2010 and covers both goods and services. Malaysia is New Zealand's sixth largest goods trading partner. On January 1, 2016 tariffs on 99.5% of New Zealand's exports to Malaysia were eliminated. New Zealand's major exports to Malaysia include dairy, malt extract, lamb and mutton while imports centre on crude oil and oil cake.

  6. New Zealand-Hong Kong: New Zealand and Hong Kong signed a CEP which came into effect in January 2011. Major exports to Hong Kong are milk powder and malt extract, while New Zealand mainly imports telephones and cellphones from Hong Kong. Government procurement is included in the agreement, ensuring that New Zealand businesses can compete with Hong Kong businesses for government contracts on a level playing field. The CEP complements New Zealand's FTA with China and enhances the potential for Hong Kong to be used as a platform for trade into China.

Ratification Pending

The CPTPP: Signed on March 8, 2018 this agreement could add between NZD1.2 billion and NZD4 billion to New Zealand's economy once fully implemented. The other signatories (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore and Vietnam) account for 31% of New Zealand's goods and services exports and includes four of New Zealand's top 10 trading partners (Australia, Japan, Singapore and Malaysia). The CPTPP still needs to be ratified by New Zealand's government as well as by other signatories.

Under Negotiation

New Zealand-European Union (EU): Negotiations for a New Zeeland-EU FTA formally launched in June 2018. Negotiations are expected to take between two and three years. Two-way trade between New Zealand and the EU is worth nearly NZD22 billion annually. Apart from the United States, the EU is New Zealand's largest trading partner, which it does not have an FTA. The EU includes five of New Zealand's top 20 trading partners (Germany, the United Kingdom, France, Italy and the Netherlands). In 2017, New Zealand imported NZD3 billion in services and NZD10.4 billion in goods from the EU and the United Kingdom. The EU accounts for approximately 15% of New Zealand's total trade in goods and services. New Zealand's main goods exports to the EU are agricultural products (particularly wine, fruit and meat) while services exports are dominated by tourism and transportation services.

Sources: WTO Regional Trade Agreements database, government websites, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: New Zealand FDI stock
Graph: New Zealand FDI stock
Graph: New Zealand FDI flow
Graph: New Zealand FDI flow

Sources: UNCTAD, Fitch Solutions
Date last reviewed: October 5, 2018

7.2 Foreign Direct Investment Policy

  1. The New Zealand Trade And Enterprise (NZTE) is New Zealand's primary investment promotion agency, responsible for economic development and strengthening New Zealand's trade with the world. NZTE provides strategic advice, research and market intelligence for new exporters, as well as support for already established export companies. Export credit insurance is also available for exporting companies.

  2. New Zealand has an open economy that works on free market principles. Major political parties are committed to an open trading regime and sound rule of law practices and the country enjoys minimal corruption. This is regularly reflected in high global rankings in the World Bank's Ease of Doing Business report and Transparency International's Perceptions of Corruption Index.

  3. As part of its strategy, the New Zealand Government aims to leverage existing offshore networks of the Ministry of Foreign Affairs and Trade (MFAT), NZTE, Immigration New Zealand (Immigration NZ), and Kea New Zealand (a New Zealand government business networking initiative) to generate investment leads.

  4. International firms currently employ about 20% of New Zealand's workforce.

  5. In May 2018, the government released a discussion document proposing the introduction of a 12.5% research and development (R&D) tax credit on eligible expenditure for businesses undertaking R&D in New Zealand. It is expected that the tax credit will be enacted in early 2019 and be available for eligible expenditure incurred from April 1, 2019, with a maximum tax credit of NZD15 million available per year.

  6. Under its Business Growth Agenda, New Zealand aims to attract foreign investment into innovation-enhancing sectors to generate economic growth, create jobs and enhance productivity. The Investment Attraction Strategy targets investment into primary industries, premium food and beverage, specialised manufacturing, infrastructure, oil, gas and mining, ICT/digital and shared services sectors. The strategy includes cross-agency participation in initiatives that involve the Ministry of Business, Innovation, and Employment, the MFAT, the Ministry for Primary Industries, NZTE, Immigration NZ, and the New Zealand Treasury.

  7. New Zealand's Overseas Investment Office is responsible for administering the government's overseas investment policies and processing applications from overseas persons intending to invest in sensitive New Zealand assets, such as 'sensitive land' and 'significant business assets'. Both terms are defined in the Overseas Investment Act 2005.

  8. New Zealand has signed bilateral investment treaties with Argentina (August 1999), Chile (July 1999), China (November 1988) and Hong Kong (July 1995). Only the treaties with China and Hong Kong have entered into force.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, government websites

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Free trade zonesNew Zealand does not have any foreign trade zones or duty-free ports. The government, through its bodies such as Tourism New Zealand and NZTE, provides assistance in certain sectors such as tourism and the export of locally manufactured goods.
Sector incentives New Zealand has various incentives which are sector dependent.

Source: Fitch Solutions

8. Taxation – 2018

NIL

9. Foreign Worker Requirements

9.1 Localisation Requirements

New Zealand residents and citizens should be considered for vacant roles before hiring individuals from overseas. Employers must provide evidence that no suitably qualified New Zealanders can perform the job offered to the foreign applicant. Exceptions exist for employers who are accredited with Immigration NZ and for some work visa categories, such as specific purpose work visas, essential skills work visas and work to resident talent (accredited employer) visas. Entrepreneurs and investors are eligible for special visas on a case-by-case basis.

9.2 Regional Exemptions

Citizens and permanent residents of Australia usually do not require a work permit, but the state has the right to request work visas in certain cases.

9.3 Visa/Travel Restrictions

In general, all visitors to New Zealand must apply for a visa to enter the country. Some exceptions to the general rule exist. Australian citizens and individuals who hold a current Australian permanent residence visa or a resident return visa do not need to formally apply for a New Zealand visa to enter the country. United Kingdom passport holders who produce evidence of the right to reside permanently in the United Kingdom can be granted a visitor visa for up to six months on arrival in New Zealand. Individuals from certain jurisdictions, including Hong Kong and Singapore, who will be in New Zealand for less than three months as a visitor do not need to apply for a visa before travelling to New Zealand.

Sources: Government websites, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Aaa (Stable)
21/09/2017
Standard & Poor'sAA+ (Stable)
30/09/2011
Fitch Ratings
AA (Stable)
14/02/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201620172018
Ease of Doing Business Index
1/189
1/190
1/190
Ease of Paying Taxes Index
21/189
11/1909/190
Logistics Performance Index
37/160
N/A15/160
Corruption Perception Index
1/176
1/180N/A
IMD World Competitiveness16/6316/6323/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201620172018
Economic Risk Index Rank6/202
Short-Term Economic Risk Score
 70.4 70.471.7
Long-Term Economic Risk Score 72 76.4 77.8
Political Risk Index Rank19/202
Short-Term Political Risk Score 84 82.782.7
Long-Term Political Risk Score 86 85.8 85.8
Operational Risk Index Rank7/201
Operational Risk Score 76.677.4
77.5

Source: Fitch Solutions
Date last reviewed: October 18, 2018

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
The New Zealand economy is boosted by the country's low reliance on agricultural imports. Nevertheless, there appears to be growing dependence on its milk powder exports to China, as well as a reliance on external financing. The economy faces downside risks due to a still precarious property market.

OPERATIONAL RISK
New Zealand's Operational Risk score is among the highest globally. The country's government has made significant progress in recent years in signing FTAs with its main trading partners, lowering tariff and non-tariff barriers.

Source: Fitch Solutions
Date last reviewed: October 23, 2018

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: New Zealand short term political risk index
Graph: New Zealand short term political risk index
Graph: New Zealand long term political risk index
Graph: New Zealand long term political risk index
Graph: New Zealand short term economic risk index
Graph: New Zealand short term economic risk index
Graph: New Zealand long term economic risk index
Graph: New Zealand long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 21, 2018

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
New Zealand Score77.5
73.075.772.0
89.4
Developed States Average73.0
63.370.976.281.8
Developed States Position (out of 27)5
51019 4
Global Average49.649.749.9
49.149.8
Global Position (out of 201)7
6
14286

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: New Zealand vs global and regional averages
Graph: New Zealand vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk
Index
Crime and Security Risk Index
Denmark80.875.475.888.284.0
Switzerland80.276.577.675.091.8
Netherlands
79.864.577.988.588.4
Sweden
79.267.677.887.583.8
New Zealand77.573.075.772.089.4
United Kingdom77.572.178.178.481.3
Norway77.162.772.680.792.3
United States
76.979.075.282.870.5
Canada
76.575.271.876.782.1
Finland
75.253.073.583.291.2
Austria74.758.671.680.388.3
Luxembourg74.452.177.779.988.9
Ireland74.765.077.871.882.5
Japan74.368.864.977.984.7
Germany74.163.469.581.181.7
Australia73.968.071.468.284.3
Belgium73.055.376.583.175.3
France72.560.270.383.175.5
Spain72.159.070.380.881.3
Portugal70.850.867.480.885.0
Iceland70.659.966.569.686.6
Liechtenstein69.654.766.261.482.6
Israel67.272.479.571.062.4
Malta65.752.463.060.780.1
Italy64.153.969.676.168.7
Isle of Man63.862.057.649.282.3
Greece58.253.147.868.863.2
Developed Markets Averages73.063.370.976.281.8
Global Markets Averages49.649.749.949.149.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: October 18, 2018

11. Hong Kong Connection

11.1 Hong Kong’s Trade with New Zealand

Graph: Major export commodities to New Zealand (2017)
Date last reviewed: October 8, 2018
Graph: Major export commodities to New Zealand (2017)
Note: 2015 is latest data available
width="701" height="450" />
Date last reviewed: October 8, 2018
Graph: Major import commodities from New Zealand (2017)
Date last reviewed: October 8, 2018
Graph: Major import commodities from New Zealand (2017)
Date last reviewed: October 8, 2018

Note: Graph shows the main Hong Kong exports to/import from New Zealand (by consignment)

Graph: Merchandise exports to New Zealand
Graph: Merchandise exports to New Zealand
Graph: Merchandise imports from New Zealand
Graph: Merchandise imports from New Zealand

Note: Graph shows Hong Kong exports to/import from New Zealand (by consignment)
Exchange Rate HK$/US$, average
7.76 (2013)
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: October 8, 2018


2017
Growth rate (%)
Number of New Zealand residents visiting Hong Kong106,757
10.3
Number of New Zealand citizens residing in Hong Kong2,282
1.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Socal Affairs - Population Division


2017
Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong54,482,5383.5
Number of developed state citizens residing in Hong Kong65,680
1.6

Note: Growth rates are from 2015 to 2017
Sources: Hong Kong Tourism Board, United Nations Department of Economic and Socal Affairs - Population Division, Fitch Solutions
Date last reviewed: October 8, 2018

11.2 Commercial Presence in Hong Kong


2016
Growth rate (%)
Number of New Zealand companies in Hong Kong N/A   N/A
- Regional headquarters
- Regional offices
- Local offices


11.3 Treaties and agreements between Hong Kong and New Zealand

  • New Zealand's bilateral investment treaties (BITs) with China and Hong Kong are its only BITs which have entered into force. Besides these treaties, the country has concluded a number of economic agreements that contain provisions on investment.
  • The double taxation agreement (DTA) between New Zealand and China entered into force on December 17, 1986 and was amended on March 22, 2000.
  • New Zealand and Hong Kong entered into a DTA which came into effect on April 1, 2012. An update to the existing DTA between New Zealand and Hong Kong was signed in June 2017. The new protocol allows automatic and spontaneous exchanges of tax information. The amendment entered into force on August 9, 2018.

Source: Fitch Solutions

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The New Zealand Chamber of Commerce in Hong Kong
Address: C/- 18/F, China Building, 29 Queen's Road Central, Central, Hong Kong
Email: exec.officer@nzcchk.com
Tel: (852) 5931 8841

Source: New Zealand Chamber of Commerce in Hong Kong

New Zealand Consulate General in Hong Kong
Address: 6501, Central Plaza, 18 Harbour Road, Wan Chai, Hong Kong
Email: nzcghkg@biznetvigator.com
Tel: (852) 2525 5044
Fax: (852) 2845 2915

Source: New Zealand Foreign Affairs and Trade

11.5 Visa Requirements for Hong Kong Residents

Hong Kong residents and British National (Overseas) passport holders have visa-free access to New Zealand for short-term visits up to three months.

Source: New Zealand Ministry of Foreign Affairs and Trade

Content provided by Picture: Fitch Solutions – BMI Research
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