We want to help Kiwi businesses succeed so we've teamed up with Dr. Ganesh Nana, Chief Economist of Berl Economics to bring you this economic update.
If you’d like to receive future issues of Business Matters simply register
Total merchandise exports fell to just under $47.9 billion in January 2015, from the peak of nearly $49.5 billion seen in August 2014, driven by the decline in dairy exports. Dairy export receipts fell despite dairy export volumes increasing by 5.83 percent in the year to January.
International dairy prices have declined across the board due to a multitude of factors. As at 1 April the GlobalDairyTrade Price Index showed a decline in whole milk powder which fell 13.3 percent, and butter milk powder which decreased significantly by 25.1 percent.
Much like recent falls in global oil prices, the decline reflects dampened demand exacerbated by increased supply. In this instance, the dampened demand comes by way of our major export markets (namely China with respect to whole milk powder), while the recent food safety issues with the threat of 1080 poisoning of infant formula may have also played an influencing role, particularly after the botulism scare in 2013.
On the other hand, potential supply is looking to increase on two fronts: firstly domestically, with recent rainfall possibly leading to an extended domestic season; and overseas competitor producers who benefit from the lower euro making their produce relatively cheaper, but more significantly, the imminent removal of European milk quotas which will mean more fierce competition for Asian markets. This will likely be a blow to New Zealand dairy producers particularly in the wake of recent food safety scares here.
Turning to liquid exports of another kind, New Zealand’s wine exports continued to show strong growth, with volumes increasing as prices decreased. Wine export receipts totalled $1.35 billion, with over 196 million litres exported.
The increased volumes reflected a bumper season harvest given favourable growing season conditions. Australia remained our leading export destination, while strong growth was seen in Northern Europe and Northern America. Domestically however, wine sales slipped as wineries continued to prioritise export markets• International visitor numbers still growing strongly, though annual growth rate slowing.
International visitor numbers continue to grow steadily, with the total number of international visitor guest nights in the year to January standing at 34.8 million. This was up 5.5 percent on the previous year.
The market share of visitor numbers from Europe has been fairly steady at around 15.5 percent of total international visitors since December 2012, But, the market share of visitors from from China has continued to grow, though at a somewhat more subdued pace than was seen between 2010 and 2013. Meanwhile American visitor numbers continued apace constituting 10.5 percent of international visitors to our shores in the year to January 2015.
Regionally, this has translated into strong growth in guest nights in most regions, particularly throughout the South Island. Notably however, numbers declined on the East Coast (Hawke’s Bay and Gisborne), and Central North Island (Taranaki, Manawatu, Whanganui).
The year to January saw a net outflow of just over 7, 400 citizens to Australia, the smallest the gap has been for at least 20 years and reversing the trend seen between 2010 and 2013. The relative performance of the New Zealand and Australian economies has continued to influence this reversal, with not only fewer departures from New Zealand to Australia, but also more arrivals from Australia. The strengthening Kiwi dollar nearly reaching parity with the Australian dollar in recent times also plays a contributing factor.
Meanwhile net migration into the country continues to grow strongly, with a net gain (that is more arrivals than departures) of nearly 54,000 migrants in the year to January. This was driven by net gains in migrants from India (predominantly consisting of those on student visas), China, the United Kingdom, and the Philippines.
While residential building activity has continued to grow since 2011, recently the rate of this growth has started to slow. Activity in Canterbury is still high though growth in the 3 months to February was relatively small compared to the strong growth in the Tasman region for the same period, compared to a year ago. Hawke’s Bay and Nelson on the other hand saw large declines in residential building consents for the same period while Auckland saw only 2.4 percent growth. In the 12 months to February however, Auckland saw 7,745 residential building consents issued.
Median house prices continue to trend upwards, led by Auckland which saw the median house sale price surge to $669,000 in the three months to January while nationally it was just over $443,000.
Recent commentary has been made about rising rents in Auckland, which arguably have been exacerbated by people who are finding it hard to buy their first homes and are subsequently turning to the rental market. Getting into a rental property has become a fiercely competitive market, though we should not be surprised that rising rents accompany rising house prices.
With the rate of residential building consents in Auckland still growing but at a subdued pace, the rental market may continue to see further increases.
However, the cost of housing is not the only factor that has been increasing in recent times. Consumer prices for education, health, and food for example have also been increasing, while others such as communication, transport and recreation have been falling. The picture of lower consumer price inflation portrayed against higher housing price inflation remains set to continue over the near term, at the least.
While every effort is made to ensure that the information, opinions and forecasts included in this publication are accurate and reliable, BERL and all contributors do not accept responsibility for any errors or omissions, or for any loss or damage resulting from reliance on or the use of information, forecasts or opinions it contains.
If there’s anything we can help you with call us on 0800 601 601, Monday to Friday, 8am – 6pm, or email email@example.com
Kiwibank Limited – All content is for information only, is subject to change and is not a substitute for commercial judgement or professional advice, which should be sought prior to entering any transaction. To the extent permitted by law the Bank disclaims liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to the material.