New Zealand Business Guide
Introduction
New Zealand is a country in the south-western Pacific Ocean comprising two large islands (the North Island and the South Island) and numerous smaller islands, most notably Stewart Island/Rakiura and the Chatham Islands. In Mâori, New Zealand has come to be known as Aotearoa, which is usually translated into English as The Land of the Long White Cloud. The Realm of New Zealand also includes the Cook Islands and Niue, which are self-governing but in free association; Tokelau; and the Ross Dependency (New Zealand's territorial claim in Antarctica).
The population is mostly of European descent, with the indigenous Mâori being the largest minority. Non-Mâori Polynesian and Asian people are also significant minorities, especially in the cities. Elizabeth II, as the Queen of New Zealand, is the Head of State and, in her absence, is represented by a non-partisan Governor-General. The Queen 'reigns but does not rule'; she has no real political influence. Her position is largely symbolic. Political power is held by the democratically-elected Parliament of New Zealand under the leadership of the Prime Minister, who is the Head of Government.
Economy
Over the past 20 years the government has transformed New Zealand from an agrarian economy dependent on concessionary British market access to a more industrialized, free market economy that can compete globally. This dynamic growth has boosted real incomes (but left behind many at the bottom of the ladder), broadened and deepened the technological capabilities of the industrial sector, and contained inflationary pressures. Per capita income has risen for eight consecutive years and reached $26,000 in 2006 in purchasing power parity terms. Consumer and government spending have driven growth in recent years, and exports picked up in 2006 after struggling for several years. Exports are equal to about 24% of GDP, down from 33 percent of GDP in 2001. Thus far the economy has been resilient, and the Labor Government promises that expenditures on health, education, and pensions will increase proportionately to output.
Market Overview
New Zealand is an excellent market for American exporters, and offers the ease of an English-speaking, stable democracy, a transparent market, and business practices very similar to those in the United States. New Zealand’s sophisticated business, financial, and legal infrastructure makes it a low risk, high return market. U.S. companies have achieved success in New Zealand largely because it is one of the world’s least regulated markets. The structure of New Zealand’s economy indicates a near permanent – albeit competitive – market for products and technologies serving the energy, oil and gas, forestry and agriculture sectors. In addition, a continuous drive to remain globally competitive and a relatively small manufacturing sector, should drive prospects for productivity-enhancing products such as information technology and manufactured goods.
New Zealand’s ten years of continuous economic growth remained unbroken as the economy achieved the proverbial “soft landing” in 2006. Annual GDP growth slowed from 2.2% in 2005 to 1.5% in 2006, which is a considerable achievement in the face exchange rate and oil price pressures. Most local economists predict the persistent strength of the New Zealand dollar will trim the growth of the country’s export economy in 2007, even though some of the most important commodities (e.g. dairy) are enjoying higher world prices. These high prices, and some significant infrastructure investments, will keep growth positive. In fact, the consensus forecasts are for growth between 1.5-2%.
For U.S. exporters, the economy’s affect on sales will depend on their buyers’ role in the economy. The strong New Zealand dollar will depress the overall profitability of exportreliant sectors, including some sectors of the agricultural economy. In contrast, the import-dependent companies in New Zealand will continue to have more purchasing power against U.S. dollars. More modest consumer spending, corporate profitability, and deferred business investment will provide a leaner year for those doing business in New Zealand. However, these are perfect conditions for American technologies and products that reduce costs, increase productivity, and wring more value from supply chains. We remind American exporters that New Zealand’s purchasing power and active export economy makes it a larger market than its relatively small population suggests. Even for consumer products, New Zealand presents an attractive proposition for companies who can scale their marketing efforts appropriately.
Market Drivers
Stronger economic growth by New Zealand’s major trading partners continues to exert “demand-pull” for New Zealand exports • New Zealanders’ disposable income and purchasing power in real terms rose 2.3% in the year to November 2006. Investment in tourism infrastructure (hotels and restaurants) is rising in response to New Zealand’s increasing popularity as a travel destination. Exploiting and upgrading energy resources and other infrastructure will produce opportunities for suppliers of innovative products and technologies in these areas.
Market Challenges
The most successful American exporters to New Zealand have developed business models that allow them to compete effectively despite the country’s small population and distance from the United States. Competition is open and encouraged by the economic reforms made by the New Zealand Government, but the dominance of neighboring Australia in New Zealand’s trade presents a significant challenge to American suppliers who face higher freight costs.
Market Opportunities
American exporters should monitor exchange rates and New Zealand demand drivers to determine opportunities and their relative price-competitiveness. The importance of the agriculture sector to New Zealand’s export economy will maintain demand for innovative agricultural equipment, food processing and packaging equipment. We expect technologies related to these sectors and supply chain management, such as RFID (radio frequency identification), to grow in response to downstream and offshore customer requirements. The importance of tourism to the New Zealand economy should sustain demand for building materials and hotel and restaurant equipment. Many New Zealand facilities will seek to upgrade physical plant and systems.
