8 Sept 2017
New Zealand: Market Profile
Major Economic Indicators
- New Zealand’s economy expanded 4% 2016, after growing by 3.1% in 2015. The economy is projected to grow at 3.1% in 2017.
- Consumer price inflation was at 0.6% in 2016 and is expected to accelerate to 1.5% in 2017. The unemployment level was maintained at 5.4% in 2016 and is expected to drop marginally to 5.3% in 2017.
- In the first seven months of 2017, New Zealand’s exports expanded 2.9% YOY to US$36.1billion, while imports increased by 3.2% YOY to US$38.4 billion during the same period.
- Hong Kong’s exports to New Zealand decreased marginally by 0.5% YOY to US$287 million in the first seven months of 2017, while imports increased by 21.8% to US$332 million in the same period.
Current Economic Situation
New Zealand is largely a service-based economy, with its services sector accounting for almost 72% of the country’s GDP, and the industry and agriculture sectors taking up GDP shares of about 20% and 8% respectively. Major economic sectors include real estate services, professional, scientific and technical services, manufacturing and retail trade and accommodation.
New Zealand’s economy expanded 4% in 2016, up from 3.1% in the previous year. Tourism-related activities including arts, recreation and other services, and retail trade and accommodation are the main drivers for the services sector. A continual property market boom helped drive a wide range of real estate services, and construction activities remained strong. New Zealand’s economy is projected to expand at 3.1% in 2017.
New Zealand’s CPI increased by 0.6% in 2016, below the target range of 1 to 3% set by the Reserve Bank of New Zealand (RBNZ). Inflation is expected to accelerate to 1.5% in 2017 with a more expansionary fiscal policy. For the labour market, the unemployment rate was maintained at 5.4% in 2016. RBNZ reduced the key policy rate to 1.75% in November 2016.
New Zealand experienced a trade deficit of US$2.8 billion in 2016, with exports fell by 1.1% year-on-year (YOY) to US$33.3 billion and imports fell by 1.7% YOY to US$36.1 billion. The fall in exports of New Zealand’s top two export commodities, namely meat and dairy products, slowed New Zealand’s exports growth. In the first seven months of 2017, New Zealand’s exports expanded 2.9% year-on-year (YOY) to US$36.1 billion, driven by strong milk powder, butter and cheese exports. Australia and China are the two major export markets for New Zealand.
On the other hand, imports were mainly driven by petroleum and related products and capital goods such as vehicles, parts and accessories and machinery and equipment. In the first seven months of 2017, New Zealand’s imports increased by 3.2% YOY to US$38.4 billion. New Zealand mainly imports from Australia, China, the US and Japan.
In Q1 2017, some 1.1 million overseas travellers visited New Zealand, a 4% YOY increase helped by a weaker NZ currency and rapid growth in Chinese tourists. 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 over the medium term.
New Zealand’s cumulative FDI reached US$68.9 billion as at end-March 2016, with that from Hong Kong and the Chinese mainland reaching, respectively, US$3.8 billion and US$510 million.
The New Zealand government strives to enhance long-term economic performance and productivity. The Budget Policy Statement 2017 released in December 2016 lends continual support for the Business Growth Agenda and maintaining budget surplus. The government is also committed to boosting spending through better public services and sustained recovery from the Kaikōura earthquakes in late 2016.
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 2015. 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.
New Zealand has been active in pursuing free trade agreements (FTAs), with bilateral FTAs signed with Australia, China, ASEAN, Singapore, Malaysia, Korea and Thailand. It is also part of the Trans-Pacific Strategic Economic Partnership (P4), the FTA involving Brunei, Chile, Singapore and New Zealand. The Trans-Pacific Partnership (TPP) and NZ-Gulf Cooperation Council FTA are trade deals that New Zealand has recently concluded but not yet come into force. Further, the country is pursuing FTAs with Russia-Belarus-Kazakhstan, India and the EU. New Zealand is also negotiating other FTAs including the Regional Comprehensive Economic Partnership (RCEP), Pacific Agreement on Closer Economic Relations (PACER) Plus and Trade in Services Agreement (TiSA).
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 co-operation 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$287 million in the first seven months of 2017, with the country being the 42nd largest export market for Hong Kong. Major export items included telecom equipment & parts (US$95 million, 33.3% share), computers (US$33 million, 11.5%), other articles of apparel, of textile fabrics (US$14 million, 4.9%), optical goods (US$9 million, 3.1%), and electrical apparatus for electrical circuits (US$7 million, 2.4%).
Hong Kong's imports from New Zealand increased by 21.8% YOY to US$332 million in the first seven months of 2017. Major import items included milk and cream and milk products other than butter or cheese (US$85 million, 25.5% share), other meat & edible meat offal, fresh, chilled or frozen (US$32 million, 9.6%), fruit and nuts (not including oil nuts), fresh or dried (US$31 million, 9.3%), butter and other fats and oils derived from milk (US$22 million, 6.7%) and live animals (US$21 million, 6.4%).
New Zealand's Economic Involvement in Hong Kong
According to the Hong Kong Census and Statistics Department, New Zealand companies had set up seven regional offices and five local offices in Hong Kong as of June 2016.
Tourists from New Zealand to Hong Kong increased 10.6% YOY to 49,736 in the first half of 2017. In 2016 Hong Kong received 96,819 visitors from New Zealand, up 1.2% from the previous year.
As of July 2017, there were 1,965 New Zealand nationals residing in Hong Kong.