financial and economic overview of newzealand

8/11/2019 Financial and Economic Overview of Newzealand

1/52

ISSN: 1173-2334 (Prin)

ISSN: 1178-749X (Online)

NEW ZEALANDEconomic and Financial

Overview 2013

Head of Lake ekapo and the Godley Valley.

Andris Apse


2/52

2

Te Waitaki River, Mackenzie Country. Hydro lakes, Waitaki and Aviemore in background.Andris Apse

Te Waitaiki Riveris a large braided river in he Mackenzie Basin in he cenre o he Souh Island. I rises in he Souhern Alps and flows hrough Lakes

Benmore, Aviemore and Waiaki, which, ogeher wih oher lakes in he area, orm par o he Waiaki hydro scheme.

Te Mackenzie Basin, more commonly known as he Mackenzie Country, is a large ellipical monane basin amous or is sheep arming. Te area

was named or James Mackenzie, a shepherd and sheep hie o Scoish descen who has become an enduring olk hero. Mackenzie herded his solen

flocks in an area hen almos compleely devoid o human habiaion. Afer his capure in 1855, he area was divided up ino large sheep saions

(pasoral arms).

Owing o is sill sparse populaion and sunning scenery, he Mackenzie Counry is requenly used or film locaions, including much o

Sir Peer Jacksons Lord o he Rings rilogy and Te Hobbi movies.


3/52

3

5 New Zealand: An Overview

5 Area and Populaion

5 Form o Governmen

6 Social Framework

6 Te reay o Waiangi

6 Foreign Relaions and Exernal rade

7 Environmenal Policy

8 Seleced Economic and Financial Daa

9 Economy

9 Inroducion

9 Recen Economic Perormance and Oulook

11 Moneary Policy11 Fiscal Policy

12 Public Deb

13 Naional Accouns

15 Prices and Coss

16 Labour Markes

17 Indusrial Srucure and Principal Economic Secors

17 Primary Indusries

19 Manuacuring

20 Service Indusries

23 Exernal Secor

23 Exernal rade

25 Composiion o Merchandise Expors and Impors

26 Geographic Disribuion o Exernal rade

28 Principal rading Parners

29 Foreign Invesmen Policy

29 Balance o Paymens

31 Foreign-Exchange Raes

32 Overseas Reserves

33 Banking and Business Environmen

33 Supervision o he Financial Secor

34 Business Law Environmen

37 Moneary Policy

38 Ineres Raes and Money and Credi Aggregaes39 Public Finance and Fiscal Policy

39 Public Finance

41 Curren Fiscal Posiion and 2012 Budge

42 axaion

45 Governmen Enerprises

45 Sae-Owned Enerprises and Crown Eniies

45 Parial Sale o Seleced SOEs

45 Crown Eniies

45 Perormance o Governmen Enerprises

49 Public Deb

49 Deb Managemen Objecives

49 Deb Record

50 Summary o Direc Public Deb

Further information

Unless otherwise specified, all monetary

units in this Overview are New Zealand

dollars. Te mid-point rate on 31 January

2013 was NZ$1 = US$0.8359.

Te fiscal year of the Government of

New Zealand ends on 30 June.

Spelling and punctuation conform to

usage in New Zealand and have not

been adjusted to conform to usage in the

United States or any particular external

market.

Where figures in tables have been

rounded, totals listed may not equal the

sum of the figures.

In tables, NA = Not Available.

CONENS


4/52

4

NEW ZEALAND

WHANGAREI

AUCKLAND

HAMILON

ROORUA

AURANGA

AUPO

CHRISCHURCH

IMARU

OAMARU

INVERCARGILL

QUEENSOWN

DUNEDIN

GISBOURNE

NAPIERHASINGS

NEW P LYMOUH

WHANGANUI

PALMERSONNORH

MASERON

WELLINGON

BLENHEIM

NELSON

GREYMOUH


5/52

5

Area and PopulationNew Zealand is a parliamenary democracy siuaed in he Souh

Pacific Ocean, 6,500 kilomeres (4,000 miles) souh-souhwes o

Hawaii and 1,900 kilomeres (1,200 miles) o he eas o Ausralia.

Wih a land area o 268,000 square kilomeres (103,000 square

miles), i is similar in size o Japan or Briain. I is comprised o wo

main adjacen islands, he Norh Island and Souh Island, and a

number o small oulying islands. Because hese islands are widely

dispersed, New Zealand has a relaively large exclusive mariime

economic zone o 4.1 million square kilomeres.

Over hal o New Zealands oal land area is pasure and

arable land and more han a quarer is under ores cover,including 1.7 million hecares o planed producion ores. I is

predominanly mounainous and hilly, wih 13% o he oal area

consising o alpine errain, including many peaks exceeding 3,000

meres (9,800 ee). Lakes and rivers cover 1% o he land. Mos o

he rivers are swif and seldom navigable, bu many are valuable

sources o hydro-elecric power. Te climae is emperae and

relaively mild.

New Zealands residen populaion a 30 June 2012 is esimaed

a 4,433,100. Wih an esimaed populaion o 1,486,000 people,

he Greaer Auckland Region is home o 33 ou o every 100

New Zealanders and is one o he ases growing regions in he

counry.

New Zealand has a highly urbanised populaion wih around 72%

o he residen populaion living in urban eniies wih 30,000 or

more people. As a June 2010, over hal o all New Zealanders

(53%) lived in he our main urban areas o Auckland (1,354,900),

Hamilon (203,400), Wellingon (389,700) and Chrischurch

(390,300).

Te populaion is heavily concenraed in he norhern hal o he

Norh Island (52%), wih he remaining populaion airly evenly

spread beween he souhern hal o he Norh Island (24%) and

he Souh Island (24%).

Form of GovernmentNew Zealand is a sovereign sae wih a democraic parliamenary

governmen based on he Wesminser sysem. Is consiuional

hisory daes back o he signing o he reay o Waiangi in

1840, when he indigenous Mori people ceded sovereigny over

New Zealand o he Briish Queen. Te New Zealand Consiuion

Ac 1852 provided or he esablishmen o a Parliamen wih

an eleced House o Represenaives. Universal suffrage was

inroduced in 1893. Like Canada and Ausralia, New Zealand

has he Briish monarch as iular Head o Sae. Te Queen is

represened in New Zealand by he Governor-General, appoined

by her on he advice o he New Zealand Governmen.

As in he Unied Kingdom, consiuional pracice in New Zealand

is an accumulaion o convenion, preceden and radiion, and

here is no single documen ha can be ermed he New Zealand

consiuion. Te Consiuion Ac 1986, however, updaed,

clarified and brough ogeher in one piece o legislaion he mos

imporan consiuional provisions ha had been enaced in

various saues. I provides or a legislaive body, an execuive and

adminisraive srucure and specific proecion or he judiciary.

Legislaive power is vesed in Parliamen, a unicameral body

designaed he House o Represenaives. I currenly has 121

members, who are eleced or hree-year erms hrough general

elecions a which all residens over 18 years o age are eniled o

voe. Auhoriy or raising revenue by axaion and or expendiure

o public money mus be graned by Parliamen. Parliamen also

conrols he Governmen by is power o pass a resoluion o no

confidence or o rejec a governmen proposal made a maer o

confidence, in which even he Governmen would be expeced

o resign.

Te execuive Governmen o New Zealand is carried ou by he

Execuive Council. Tis is a ormal body made up o he Cabine

and he Governor-General, who acs on he Cabines advice. Te

Cabine isel consiss o he Prime Miniser and his/her Minisers,

who mus be chosen rom among eleced Members o Parliamen.

Each Miniser supervises and is responsible or paricular areas

o governmen adminisraion. Collecively, he Cabine is

responsible or all decisions o he Governmen.

New Zealand: An Over v iew


6/52

6

NEW ZEALAND: AN OVERVIEW

As a resul o a reerendum held in conjuncion wih he 1993

elecion, New Zealand changed rom a Firs Pas he Pos (FPP)

sysem o elecing Members o Parliamen o a Mixed Member

Proporional (MMP) sysem o proporional represenaion.

MMP is similar o he German Federal sysem o elecion o he

Lower House. Under MMP, he oal number o seas each pary

has in Parliamen is proporional o ha parys share o he oal

lis voe. Around hal o all Members o Parliamen are eleced

direcly as elecorae represenaives as under he FPP sysem. Te

remaining members are chosen by he paries rom pary liss. Tis

change was pu in place or he 1996 elecion.

A reerendum on he uure o MMP was held in conjuncion wih

he 2011 elecion. A majoriy o responses avoured he reenion

o MMP. An independen review o how MMP operaes was

held during 2012. Te Governmen is currenly considering is

response o he review recommendaions.

Following he general elecion in November 2011, eigh poliical

paries are represened in Parliamen. Te oal number o seas

sands a 121, an "overhang" o one sea, because he Mori Pary

won one more elecoral sea han i was eniled o according o

is share o he pary voe overall. Te Naional Pary ormed a

minoriy Coaliion Governmen afer he elecion wih suppor

agreemens wih AC, Unied Fuure and he Mori Pary. Te

Honourable John Key, he Leader o he Naional Pary, is Prime

Miniser and he Honourable Bill English, Depuy Leader o

Naional, is Depuy Prime Miniser.

Te judicial sysem in New Zealand is based on he Briish model.

By convenion and he Consiuion Ac 1986, he judiciary is

independen rom he execuive.

Social Framework

New Zealand has a high degree o social and poliical sabiliy

and a modern social welare sysem which includes universal

enilemen o primary and secondary educaion and subsidised

access o healh services or all residens. Te populaion is mainly

European wih around 77% o residens designaing hemselves

as being o European descen, 15% as New Zealand Mori, 7%

as Pacific Islanders, 10% as Asian and 1% as oher. (Noe: Census

respondens are able o give muliple responses o ehniciy

quesions, hence he number o responses is greaer han he oal

populaion.) Tere is a high incidence o inermarriage among

hese groups. Te majoriy o Europeans are o Briish descen,

while he New Zealand Mori are o he same ehnic origin as

he indigenous populaions o ahii, Hawaii and several oher

Pacific Islands. In recen years here has been an increasing level o

immigraion rom Asian counries.

Te reaty of Waitangi

Te reay o Waiangi is regarded as a ounding documen o

New Zealand. Firs signed a Waiangi on 6 February 1840, he

reay is an agreemen beween Mori and he Briish Crown

and affirms or Mori heir saus as he indigenous people o

New Zealand.

Te reay comprises hree aricles. Te firs grans o he Queen

o England he righ o govern New Zealand while he second

aricle guaranees Mori possession o heir lands, oress, fisheries

and oher resources. Te hird and final aricle gives Mori all he

ciizenship righs o Briish subjecs. Tere are ousanding claims

by Mori ha he Crown has breached he reay, paricularly he

guaranees under he second aricle. Since 1992, he Governmen

has developed processes and policies o enable he Crown and

Mori o sele any reay o Waiangi claim relaing o evens

beore Sepember 1992.

Foreign Relations and External rade

New Zealand oreign policy seeks o influence he inernaional

environmen o promoe New Zealands ineress and values,

and o conribue o a sable, peaceul and prosperous world.In seeking o make is voice heard abroad, New Zealand aims o

advance and proec boh is securiy and prosperiy ineress.

New Zealand is a long-sanding member o he Organisaion

or Economic Cooperaion and Developmen (OECD), he

Inernaional Moneary Fund (IMF), he World Bank Group,

he Asian Developmen Bank (ADB) and he World rade

Organisaion (WO).

rade is essenial o New Zealands economic prosperiy. Expors

o goods and services make up over 30% o New Zealands gross

domesic produc (GDP). New Zealands rade ineress are well

diversified. Ausralia, China, Norh America, he European Unionand he Associaion o Souh-Eas Asian Naions (ASEAN) ake

beween around 10% and 25% each o New Zealands goods

expors. Oher major rading parners include Japan and Korea.

able 1 Disribuion o Seas in Parliamen Among Principal Paries Over he Las Six General Elecions

1996 1999 2002 2005 2008 2011

Naional Pary 44 39 27 48 58 59

Labour Pary 37 49 52 50 43 34

Green Pary - 7 9 6 9 14

New Zealand Firs 17 5 13 7 - 8

M ori Pary - - - 4 5 3

AC New Zealand 8 9 9 2 5 1

Unied Fuure 1 1 8 3 1 1Mana Pary N/A N/A N/A N/A N/A 1

Oher 13 10 2 1 1 -

otal 120 120 120 121 122 121

Source: Elecoral Commission


7/52


7

While New Zealand expors a broad range o producs, i is relian

on expors o commodiy-based producs as he main source o

expor receips and relies on impors o raw maerials and capial

equipmen or indusry.

New Zealand is commied o a muli-rack rade policy which

includes he ollowing measures:

mulilaeral rade liberalisaion hrough he WO;

regional cooperaion and liberalisaion hrough acive

membership o such ora as he Asia Pacific Economic

Cooperaion (APEC) and he Eas Asian Summi;

a ocus on building regional relaionships hrough various

policy iniiaives; and

bilaeral and plurilaeral rade arrangemens, such as:

he Closer Economic Relaions (CER) agreemen wih

Ausralia (enered ino orce in 1983);

bilaeral agreemens wih Singapore, Tailand, China,

Malaysia and Hong Kong;

he rans-Pacific Sraegic Economic Parnership Agreemen

(previously known as P4) wih Singapore, Chile and Brunei;

he ASEAN-Ausralia-New Zealand Free rade Agreemen;

he recenly concluded New-Zealand Gul Cooperaion

Council (GCC) Free rade Agreemen;

curren negoiaions wih Korea, India, Chinese aipei and

he cusoms union o Russia, Kazakhsan and Belarus;

curren rans-Pacific Parnership (PP) negoiaionso include he Unied Saes, Ausralia, Peru, Vienam,

Malaysia, Canada, Mexico and he original P4 counries;

he PACER (Pacific Agreemen on Closer Economic

Relaions) Plus negoiaions, wih a ocus on economic

developmen wihin he Pacific; and

curren negoiaions on RCEP (Regional Comprehensive

Economic Parnership) which involve he en members o

ASEAN, China, India, Korea, Japan and Ausralia.

New Zealand remains commied o a reducion o world-wide

rade barriers. ariffs have been sysemaically reduced and

quaniaive conrols on impored goods eliminaed. Around 90%

o goods come ino New Zealand ariff ree, including all goods

rom Leas Developed Counries.

New Zealand was acive in laying he oundaions or he Doha

round o WO negoiaions. Agriculure and services are o

prime imporance o he New Zealand economy and agriculure,

in paricular, is cenral o he Doha negoiaions. New Zealand is

working wih oher like-minded counries o reduce barriers o

rade in goods and services and provide improved marke access

or New Zealand exporers.

New Zealand, as a member o APEC, is commied o achieving

APECs goals o ree rade and invesmen in he region. Asia-

Pacific regional linkages remain a he core o New Zealands

poliical and economic ineress. Te counries o APEC ake more

han 70% o New Zealands expors, provide 71% o ourism

arrivals and accoun or around 75% o New Zealands oreign

direc invesmen.

Environmental Policy

Te New Zealand Governmen recognises he imporance o

is environmen and naural resources o social and economic

developmen.

New Zealand is wealhy in naural resources. I has pleniul, clean

waer; clean air; erile soil and a emperae climae well-suied o

oresry, livesock and agriculure; long coaslines and significan

aquaculure resources; low energy use, wase and greenhouse

gas emissions per uni o economic oupu; significan mineral

and peroleum reserves; and exraordinary biodiversiy boh

on land and in is waer bodies. Te World Bank esimaes ha

New Zealand ranks eighh ou o 120 counries in naural capial

per capia; i is ouranked only by peroleum-exporing counries.1

Given he dependence o he economy on he primary secor,

beer managemen o reshwaer and oher renewable resources,

he coninued proecion o biodiversiy and marine resources,

reducing wase and improving energy efficiency are all essenial

or creaing wealh and providing higher living sandards or

New Zealanders. Programmes are in place or under urher

developmen in all hese areas.

Te Resource Managemen Ac 1991 (RMA) provides a

naional ramework or balancing environmenal proecion wih

economic, social and culural values. Local governmen has he

major responsibiliy or delivering resource managemen planning

and consening, wih cenral governmen providing guidance

on how o apply he RMA and direcion on maers o naional

imporance. Amendmens o he RMA in 2009 sreamlined and

simplified processes and creaed a new agency, he Environmenal

Proecion Auhoriy, o aciliae decision-making on proposals

o naional significance. Furher amendmens are planned or

inroducion in 2013. Tese will include changes o srenghen

planning oucomes, reduce uncerainy, reduce coss and delays

and enhance Mori paricipaion in resource managemenprocesses.

Climae change presens a paricular challenge or New Zealand,

boh rom an inernaional and domesic policy perspecive.

New Zealand is a small counry wih a unique emissions profile

driven by he predominance o land-use indusries. Despie

New Zealands relaively small conribuion o global emissions,

he Governmen is noneheless commied o paricipaing

consrucively in he inernaional climae change dialogue.

An Emissions rading Scheme (ES), inroduced in 2008, is

designed o assis New Zealand in meeing inernaional climae

change commimens a leas cos and o reduce New Zealandsne emissions below business-as-usual levels by placing obligaions

on emiers o surrender unis in relaion o heir emissions.

1 World Bank. Te Changing Wealh o Naions: Measuring Susainable Developmen in he New Millenium. (2011). Rerieved rom

hp://daa.worldbank.org/daa-caalog/wealh-o-naions


8/52

8

Selected Economic and Financial Data

able 2 Saisical Daa

2008 2009 2010 2011 2012(dollar amouns in millions)

GDP a Curren Prices1, 2 183,997 185,555 189,718 198,525 206,058

Annual % Increase (Decrease) in Real GDP1, 2, 3 2.5 (1.3) (1.3) 1.6 1.6

Populaion4 4,261 4,305 4,358 4,400 4,428

Unemploymen Rae5 4.2 6.5 6.4 6.6 7.3

Change in Consumer Price Index6 5.1 1.7 1.5 4.6 0.8

Exchange Rae7 0.7135 0.6739 0.7175 0.8327 0.8085

90-Day Bank Bill Rae8 8.20 2.77 3.22 2.83 2.65

10-Year Governmen Loan Sock Rae8 6.04 5.73 5.31 4.68 3.55

erms o rade Index 2, 9 1,242 1,074 1,210 1,296 1,208

Curren Accoun Defici as a % o GDP 2, 10 (8.6) (3.0) (3.2) (4.3) (4.7)

Source: Saisics New Zealand, RBNZ

able 3 Governmen Finance10

Year ended 30 June

2006/07 2007/08 2008/09 2009/10 2010/11 2011/1211

(dollar amouns in millions)

oal Revenue 74,589 81,479 79,928 74,725 81,563 83,637

oal Expenses 68,729 75,842 83,329 81,040 99,959 94,446

OBEGAL12 5,860 5,637 (3,893) (6,315) (18,369) (10,809)

Gains/(Losses) 2,162 (3,253) (6.612) 1,806 5,036 (1,792)

Operating Balance 8,022 2,384 (10,505) (4,509) (13,360) (12,601)

Operaing Balance % o GDP 4.7 1.3 (6.8) (2.4) (6.7) (6.0)

oal Asses 180,347 200,835 217,151 223,355 245,215 245,615

oal Liabiliies 83,520 95.321 117,636 128,367 164,328 177,333Net Worth 96,827 105,514 99,515 94.988 80,887 68,282

Ne Direc Domesic Borrowing (3,917) 1,721 8,454 8,016 18,362 -

Ne Direc Overseas Borrowing 312 (1,296) 717 409 787 -

Source: Te reasury

able 4 Direc Public Deb

Inernal Funded Deb 26,860.4 28,210.4 29,614.5 38,575.5 60,519.9 -

Inernal Floaing Deb 2,303.4 1,655.0 7,505.0 8,065.0 7,326.0 -

Exernal Deb 2,048.0 2,048.5 4,718.7 2,197.2 214.0 -

oal Direc Public Deb 31,211.4 31,913.9 41,298.2 48,837.7 68,059.9 -

Source: Te reasury

1 Year ended 31 March.

2 2012 daa provisional. Prior years daa revised.

3 Producion based chain volume series expressed in 1995/96 prices.

4 Sepember year residen populaion esimae.

5 Sepember quarer, seasonally adjused.

6 Annual percenage change, Sepember quarer.

7 US$ per NZ$ quarerly average or June.

8 June quarerly average.

9 Year ended 30 June. Base: June quarer 2002 = 1,000.

10 Year ended 30 June.

11 Financial Saemens o he Governmen o New Zealand or he Year Ended 30 June 2012.

12 Operaing Balance Excluding Gains and Losses. Te OBEGAL is he operaing balance excluding gains and losses on asses and liabiliies o insiuions such as he

Acciden Compensaion Corporaion, Earhquake Commission and he Governmen Superannuaion Fund.



9/52

9

IntroductionNew Zealand has a small, open economy ha operaes on ree

marke principles. I has sizeable manuacuring and service

secors complemening a highly efficien expor-oriened

agriculural secor. New Zealand is highly dependen on he

primary secor wih commodiies accouning or around hal o

oal goods expors. Expors o goods and services accoun or

around one-hird o real expendiure GDP.

New Zealands high proporion o winer sunshine hours and

considerable rainall provide an ideal resource base or pasoral

agriculure, oresry, horiculure and hydro-eleciciy generaion.

Hydro-elecriciy provides a relaively cheap source o energyand has allowed he developmen o energy-based indusries

such as aluminium refinemen. New Zealand is also a popular

overseas visior desinaion and ourism is an imporan source o

expor income.

Over he las quarer o a cenury, he New Zealand economy has

changed rom being one o he mos regulaed in he OECD o one

o he leas regulaed. Te minoriy Naional Pary Governmen

eleced in November 2008, and re-eleced in November 2011,

aims o lif he long-erm perormance o he economy hrough

six key policy drivers: a growh-enhancing ax sysem; beer

public services; suppor or science, innovaion and rade;

beer regulaion, including regulaion around naural resources;

invesmen in inrasrucure; and improved educaion and skills.

Recent Economic Performance and Outlook

Background

Te New Zealand economy enered recession in early 2008,

beore he effecs o he global financial crisis se in laer in

he year. A drough over he 2007/08 summer led o lower

producion o dairy producs in he firs hal o 2008. Domesic

aciviy slowed sharply as high uel and ood prices dampened

domesic consumpion, while high ineres raes and alling house

prices drove a rapid decline in residenial invesmen.

Te oulook or he New Zealand economy deerioraed

sharply ollowing he inensificaion o he global financial crisis

in Sepember 2008. Similar o experiences across advanced

economies, business and consumer confidence plummeed

as uncerainy dominaed he global financial and economic

environmen. In addiion, local banks access o unding in overseas

markes was emporarily curailed a he heigh o he crisis.

Response o Global Financial Crisis (GFC)

Te Governmen and he Reserve Bank o New Zealand (RBNZ)

responded o he crisis wih a range o measures designed o

alleviae is effecs. Te RBNZ lowered he Official Cash Rae (OCR)rom is level o 8.25% over he year o July 2008 o a low o 2.5% a

he end o April 2009. Te Bank also inroduced a range o aciliies

o ensure ha adequae liquidiy was available o he banking

secor. Te Governmen inroduced reail and wholesale bank

guaranees aimed a resoring confidence in he banking secor

and providing banks wih improved access o wholesale unding.

Te Labour-led Governmen proceeded wih personal income ax

cus on 1 Ocober 2008 and he new Naional-led Governmen,

which came o power in November 2008, inroduced urher ax

reducions effecive rom 1 April 2009.

Oher measures aken by he new Governmen in December2008 were aimed more direcly a alleviaing he effecs o he

downurn, including inrasrucure projecs and a emporary relie

package o assis small and medium-sized businesses.

Growh

In oal, New Zealand experienced six quarers o negaive

economic growh beween he March quarer 2008 and he June

quarer 2009, oalling 4.0% o real GDP. Te relaive shallowness

o he recession compared avourably wih oher naions in

he OECD, wih New Zealand sixh leas affeced ou o he 34

member naions.

Te New Zealand economy hen grew or our consecuive

quarers up o mid-2010, oalling 3.0% o real GDP. Te recovery

was led by expors, wih srong demand rom major rading

Economy


10/52

10

parners, Ausralia and China. Tis was helped by hisorically

high prices or New Zealands commodiy expors, which flowed

hrough o a high erms o rade. Te srengh in he exernal

secor was led by a boom in demand rom China, which boosed

dairy and log expors. However, in he second hal o 2010, he

New Zealand economy experienced a echnical recession (wo

quarers o negaive real GDP growh).

Real GDP growh bounced back in 2011, growing 2.6% over he

year despie a devasaing earhquake in Canerbury in February.

Te lif in GDP growh was characerised by srong primary

producion and an improvemen in services aciviy, offseing he

coninued weakness in he consrucion secor. Te Rugby World

Cup in Sepember and Ocober provided a posiive conribuion

o growh in he second hal o he year.

Real GDP srenghened urher a he beginning o 2012, growing

0.9% in he March quarer. Te growh in aciviy was reasonably

broad-based, including good pasoral growing condiions

providing a boos o agriculural producion and ood processing.

However, growh in he middle o 2012 was weaker wih GDP

growh o 0.5% across boh he June and Sepember quarers,

suppored by aciviy in he consrucion secor. Te Canerbury

rebuild is expeced o be a main driver o growh in he coming

year, gaining momenum in he firs hal o 2013.

Canerbury Earhquakes

On 22 February 2011, he Canerbury region on he eas coas

o he Souh Island experienced a devasaing 6.3-magniude

earhquake. A oal o 181 people were killed; he second

deadlies naural disaser in New Zealand hisory. Tis ollowed a

7.1-magniude earhquake on 4 Sepember 2010, in which here

had been no casualies. Te earhquakes (including subsequen

afershocks) caused wide-spread damage o buildings and

inrasrucure, in paricular o he Cenral Business Disric (CBD)

and easern pars o he ciy.

Te New Zealand reasury esimaes he damage rom he

earhquakes a around $30 billion (14% o GDP), much o which

is covered by privae insurance (reinsured hrough overseas

insurance companies) and he governmen-owned Earhquake

Commission (EQC). Despie he significan amoun o disrupion

caused by he earhquakes (in paricular he February 2011

even), he clean-up and demoliion operaions helped minimise

he immediae growh impac. Many businesses were able o

relocae ou o he badly-damaged CBD and keep rading.

Primary and manuacuring producion in he region was no

significanly affeced.

Te Canerbury rebuild is expeced o be a significan driver o

economic growh over he nex five o en years wih boh he

June and Sepember 2012 quarer GDP ouurns providing hard

evidence o rebuilding aciviy. Te pace o he rebuild over he

medium erm is uncerain, in par owing o uncerainy aroundcapaciy consrains.

Labour Marke

Te labour marke has shown lile improvemen ollowing he

GFC wih he unemploymen rae siing a 7.3% or he Sepember

quarer 2012. Tis ollows a wo-year period o volailiy in

he unemploymen rae afer i rose rom a low o 3.5% in he

December quarer 2007 o 6.9% in he December quarer 2009.

Te Canerbury earhquakes iniially had a negaive impac on he

labour marke, wih employmen alling 8.0% in he region in he

year o Sepember 2011. More recenly, labour marke saisics

in Canerbury have srenghened wih employmen rising 2.9% in

he year o Sepember 2012. Excluding Canerbury, employmen

ell 0.4% over he same period, wih he unemploymen rae

above he headline figure, a 7.6%.

Exernal rade

Te prices o he commodiies ha New Zealand expors were a

record high levels in early 2011, afer more han recovering he

significan alls experienced during he GFC. Te high commodiy

prices were widespread, including dairy producs, mea and logs,

owing o surging demand rom China. Te high commodiy prices

flowed hrough o a hisorically high erms o rade, as expor

prices rose much aser han impor prices. Te srong erms

o rade have provided an offse o he weaker real economy,

helping o boos nominal GDP. Since early 2011, global condiions

have deerioraed; he erms o rade eased off heir peak in he

Sepember quarer 2011, and coninued o do so in he firs hal

o 2012. Furher moderaion is expeced o have occurred in he

second hal o 2012 bu improvemen is expeced in 2013 as

higher spo prices flow hrough o expor prices.

Balance o Paymens

Exernal srengh and a subdued domesic economy resuled

in he curren accoun and he ne inernaional invesmen

posiion improving during he recovery rom he GFC. Te annual

curren accoun defici ell rom 8.8% o GDP in he December

quarer 2008 o a low o 1.8% in he March quarer 2010. Te

narrowing o he curren accoun defici was helped by a posiive

balance on he goods accoun since he sar o 2010, wih goods

expors oupacing goods impors. Ne inernaional liabiliies

ell rom 84.6% o GDP in March 2009 o 66.7% in March 2011,

owing o he smaller curren accoun deficis, valuaion changes

and ousanding reinsurance claims relaed o he Canerbury

earhquakes.

Afer he low o 1.8% in March 2010, he curren accoun defici

widened o 4.7% in he Sepember 2012 quarer, as he goods

and invesmen income balances deerioraed, parly reflecing

alling commodiy prices and higher profi outlows rom he

banking secor. Te curren accoun defici is expeced o widen

urher over he medium erm owing o increased impors or

he Canerbury rebuild, as well as increasing deb servicing

coss and higher profi outlows. New Zealands ne inernaional

liabiliies increased rom a rough o 66.7% o GDP in he March

quarer 2011 o 71.2% o GDP in he Sepember quarer and are

expeced o gradually rise urher.

ECONOMY


11/52

11

Exchange Rae

Te rade Weighed Index (WI), a baske o exchange raes

or New Zealands major rading parners, began rereaing rom

hisorically high levels in March 2008, as he marke assessed

moneary policy in New Zealand shifing owards a loosening

bias and a weaker oulook or growh. Te WI ell 28% beween

February 2008 and February 2009, cushioning he economy rom

he global downurn.

As he oulook or global growh became more opimisic, he

US dollar weakened and demand or commodiies improved.

As a resul, he WI appreciaed rapidly rom early 2009, rising

rom 52.3 in February o 66.5 in Ocober, a 27% increase. High

commodiy prices, as well as a relaively srong economy, resuled

in urher increases in he WI o 72.1 in Augus 2011, beore

rereaing o around 68 in December as global risk aversion

increased and commodiy prices eased.

Te WI appreciaed again in 2012, rising o 73.0 by April 2012,

beore declining o around 70.0 in he middle o he year as risks

around he euro deb crisis escalaed. Recenly, commodiy prices

or New Zealand expors have sared o recover and euro zone

risks recede slighly, which saw he WI appreciae o 74.3 in

December 2012.

Inflaion

Annual Consumer Price Index (CPI) inflaion was comorably

wihin he Reserve Bank o New Zealands (RBNZ) 1% o 3% arge

band in he wo years ollowing he GFC. Inflaion increasedsignificanly in he December quarer 2010 as an increase in he

rae o goods and services ax (GS) rom 12.5% o 15% on 1

Ocober 2010 was passed on o consumers. Te CPI rose 2.3% in

he quarer, aking annual inflaion o 4.0%, well above he arge

range. Inflaion increased urher during 2011, rising o 5.3% on an

annual basis in June beore alling o 1.8% in he year o December

2011 as he effec o he GS rae rise ell ou o he calculaion.

Over 2012, CPI inflaion coninued o ease, alling 0.2% in he

December 2012 quarer, which brough annual inflaion down o

0.9%, a reflecion o he srong New Zealand Dollar and alling

commodiy prices which have depressed radables prices.

Oulook

In he December 2012 Half Year Economic and Fiscal Update

(HYEFU), he New Zealand reasury expeced annual average

growh in he economy o be 2.3% in he March 2013 year and

2.9% in he March 2014 year, driven mainly by he Canerbury

rebuild and recovery in domesic demand. Recovering world

demand, as well as sill-high commodiy prices, should also assis

expor growh, alhough his is dependen on he global oulook.

Te perormance o he global economy exceeded expecaions

in 2010 bu hen slowed significanly as public simulus measures

aded, naural disasers in Japan and Ausralia caused disrupion

and Europe sovereign-deb issues re-emerged. However,

New Zealands increasing exposure o he aser growing areas

o he world, in paricular Ausralia and Asia excluding Japan,

resuled in expors holding up beer han oherwise would have

been expeced. New Zealand rading parner growh is expeced

o have increased slighly in 2012, o hold up in 2013, and o

pick up again in 2014. While privae consumpion is expeced

o pick up, spending is likely o remain subdued as households

remain cauious. Invesmen is expeced o grow srongly as he

earhquake rebuild ges underway. Te simulus rom he rebuild

is expeced o offse he impac o fiscal consolidaion over he

orecas period.

Monetary Policy

Te ocus o moneary policy is o mainain price sabiliy. A Policy

arges Agreemen beween he Governor o he RBNZ and he

Miniser o Finance ses ou he specific arges or mainaining

price sabiliy, while seeking o avoid unnecessary insabiliy in

oupu, ineres raes and he exchange rae. Te curren Policyarges Agreemen, which was signed in Sepember 2012 on he

appoinmen o a new Governor, requires he Bank o mainain

inflaion in he range o 1% o 3% on average over he medium

erm, bu wih he addiional requiremen o ocus on keeping

uure average inflaion near he 2% arge midpoin.

Following he lowering o he OCR rom 8.25% in mid-2008 o

2.5% in April 2009 in response o he inernaional credi crisis,

he RBNZ began increasing he OCR again as he economy

began o recover. Te OCR was increased o 3.0% in July 2010,

beore a cu o 50 basis poins back o 2.5% as an insurance cu

ollowing he February 2011 Canerbury earhquake. Since hen,

a deerioraing global oulook has mean ha ineres raes have

remained a 2.5%, wih increases no expeced unil lae 2013 as

he Canerbury rebuild ges underway, creaing some inflaionary

pressures.

Fiscal Policy

Pruden Fiscal Managemen

In 1994, he Governmen enaced he Fiscal Responsibiliy Ac.

Te Ac was inended o assis in achieving consisen good qualiy

fiscal managemen over ime. Good qualiy fiscal managemen

should enable he Governmen o make a major conribuion o

he economic healh o he counry and be beer posiioned o

provide a range o services on a susained basis. Tis Ac has now

been repealed bu is provisions have largely been incorporaed

ino Par 2 o he Public Finance Ac 1989.

Par 2 requires he Crowns financial reporing o be in accordance

wih New Zealand Generally Acceped Accouning Pracice

(NZGAAP). Te primary fiscal indicaors are he operaing

balance, deb and ne worh.

Par 2 requires he Governmen o pursue is policy objecives in

accordance wih he principles o responsible fiscal managemen

se ou in he Ac. Tese include: reducing deb o pruden levels o provide a buffer agains

uure adverse evens;

ECONOMY


12/52

12

mainaining pruden deb levels by ensuring ha, on average,

oal operaing expenses do no exceed oal operaing

revenues (i.e., he Governmen is o live wihin is means over

ime, wih some scope or flexibiliy hrough he business

cycle);

achieving and mainaining levels o ne worh o provide a

buffer agains adverse evens;

managing he risks acing he Crown; and

pursuing policies ha are consisen wih a reasonable degree

o predicabiliy abou he level and sabiliy o uure ax raes.

Key Fiscal Indicaors

An exended period o growh led o a srong fiscal posiion or

he Governmen in he 2007/08 year. However, he recession

ha began in he firs quarer o 2008 resuled in a decrease in

revenues and expendiure increases which weakened he fiscal

posiion in 2008/09 and subsequen years.

Operating balance: Following a prolonged period o fiscal

deficis, New Zealand achieved surpluses in 1993/94 and

remained in surplus unil 2007/08. In 2011/12, he operaing

balance was a defici o $14.90 billion. Te December 2012

HYEFU orecass or he operaing balance or 2012/13, 2013/14,

2014/15, 2015/16 and 2016/17 are or a defici o $3.28 billion

and surpluses o $0.05 billion, $2.10 billion, $3.55 billion and

$4.39 billion respecively.

Core Crown operaing expenses as a percenage o GDP

decreased o 33.8% in 2011/12, down rom 35.6% in 2010/11.

Expenses are conrolled hrough oupu budgeing, accrual

reporing and decenralised cos managemen.

Net debt: Ne deb increased o 24.8% o GDP in 2011/12 as

a resul o he addiional borrowing underaken o offse he

Governmens operaing deficis.

Net worth: Afer a prolonged period o increases, ne worh

has been decreasing since 2007/08 and sood a $59.3 billion

as a 30 June 2012. Te decreases have arisen as a resul o he

operaing deficis, parly offse by asse revaluaions.

Fiscal Objecives

Te Governmens long-erm fiscal objecives were se ou 2012Fiscal Strategy Report published wih he 2012 Budge and

reconfirmed in he 2013 Budget Policy Statement in December

2012. Te long-erm fiscal objecives include objecives or deb,

operaing balance, operaing expenses and revenue, and ne

worh.

Te long-erm deb objecive requires ne deb o remain

consisenly below 35% o GDP, and o be brough back o

no higher han 20% o GDP by 2020. Consisen wih his,

he objecive or he operaing balance is o reurn o an

operaing surplus sufficien o mee he Governmens ne

capial requiremen, including conribuions o he New ZealandSuperannuaion Fund. Te curren shor-erm fiscal inenion is or

he operaing balance (excluding gains and losses) o be reurned

o surplus as soon as possible and no laer han 2014/15, subjec

o any significan shocks. Curren orecass are or ne core Crown

deb o peak below 30% o GDP in 2016/17.

Public Debt

Prior o March 1985, successive governmens had borrowed

under a fixed exchange-rae regime o finance he balance

o paymens defici. Since he adopion o a reely floaing

exchange-rae regime, governmens have underaken new

exernal borrowing only o rebuild he naions exernal reserves

and o mee refinancing needs.

Direc public deb increased by a ne amoun o $5,719 million

including swaps beween 1 July 2011 and 30 June 2012.

Tis increase was owing o a ne increase in inernal deb o

$6,241 million and a decrease o $522 million in exernal deb.

Governmen gross direc deb amouned o 38.9% o GDP in he

year ended June 2012, up rom 36.6% he previous year.

ECONOMY

Early morning on Lake Benmore, Mackenzie Country.Andris Apse


13/52

13

able 5 Gross Domesic Produc and Gross Naional Expendiure1

Te ollowing able shows Gross Domesic Produc and Gross Naional Expendiure in nominal erms or he las five March years:

Year ended 31 March

2008 2009 2010 2011 2012


Compensaion o Employees 80,619 84,848 85,388 87,950 91,468

Ne Operaing Surplus 55,579 50,872 52,673 57,206 58,255

Consumpion o Fixed Capial 25,645 27,773 28,698 28,733 29,155

Indirec axes 22,758 23,100 23,625 26,048 28,669

Less Subsidies 604 1,039 666 823 1,001

Gross Domestic Product 183,997 185,555 189,718 199,113 206,546

Final Consumpion Expendiure General Governmen 34,312 37,428 38,437 39,862 41,550

Privae 107,193 109,753 112,878 117,571 123,493

Physical Increase in Socks 1,611 51 (897) 1,061 1,847

Gross Fixed Capial Formaion 42,415 40,513 36,246 37,019 37,281

Gross National Expenditure 185,531 187,746 186,664 195,512 204,170

Expors o Goods and Services 52,176 58,248 53,770 59,331 62,521

Less Impors o Goods and Services 53,710 60,438 50,716 56,318 60,633

Expenditure on Gross Domestic Product 183,997 185,555 189,718 198,525 206,058

1 2012 daa esimaed. Prior years daa revised.

Source: Saisics New Zealand

ECONOMY

Figure 1 Real Gross Domesic Produc

%

Annual average % change Quarerly % change


-4

-3

-2

-1

0

1

2

3

4

5

6

Jul 12Jul 11Jul 10Jul 09Jul 08Jul 07Jul 06Jul 05Jul 04Jul 03Jul 02Jul 01Jul 00

National Accounts

In he year o Sepember 2012, he New Zealand economy

recorded annual average GDP growh o 2.5%. Growh in he

Sepember 2012 quarer was 0.2% ollowing growh o 0.3% in

he June quarer and 0.9% in he March quarer.


14/52

14

able 6 Gross Domesic Produc by Producion Group1

Te ollowing able shows GDP by major indusries a consan 1995/96 prices.

Year ended 30 September

2008 2009 2010 2011 2012 2012

(dollar amouns in millions) % o oalManuacuring 20,148 17,352 18,647 18,438 18,541 12.8

Renal, hiring and real esae services 17,609 17,649 17,645 17,785 18,063 12.5

Pro, scienific, echnical, admin and suppor 11,011 10,744 10,792 11,232 11,746 8.1

Reail rade and accommodaion 9,159 8,816 9,057 9,206 9,638 6.7

Agriculure, oresry and fishing 6,583 7,648 7,233 7,652 9,179 6.4

Inormaion media and elecommunicaions 8,946 8,998 9,017 9,021 8,768 6.1

Wholesale rade 8,026 7,378 7,465 7,879 8,038 5.6

Healh care and social assisance 7,182 7,408 7,673 7,634 7,712 5.3

ranspor, posal and warehousing 7,436 7,008 7,305 7,459 7,541 5.2

Financial and insurance services 6,472 6,622 6,675 6,841 7,011 4.9

Consrucion 7,213 6,457 6,624 6,215 6,297 4.4

Public adminisraion and saey 5,824 5,898 6,034 6,022 5,950 4.1

Educaion and raining 4,425 4,531 4,586 4,637 4,676 3.2Ars, recreaion and oher services 4,446 4,386 4,527 4,486 4,394 3.0

Elecriciy, gas, waer and wase services 2,938 3,001 3,194 3,220 3,057 2.1

Mining 1,497 1,322 1,426 1,226 1,195 0.8

Producion GDP 140,591 137,214 139,767 140,891 144,385 100.0

Annual Average % change 0.5 (2.4) 1.9 0.8 2.5

Primary indusries 8,532 9,373 8,980 9,106 10,420 7.2

Goods-producing indusries 30,575 27,277 28,945 28,284 28,246 19.6

Service indusries 90,139 89,187 90,565 92,062 93,660 64.9

1 2011 daa esimaed. Prior years daa revised.


Figure 2 Gross Domesic Produc by Indusry Group


Mining

Elecriciy, Gas, Waer,& Wase Services

Ars, Recreaion,& Oher Services

Educaion & raining

Public Adminisraion& Saey

Consrucion

Financial &

Insurance Services

ranspor, Posal,& Warehousing

Healh Care &Social Assisance

Wholesale rade

Inormaion Media& elecommunicaions

Agriculure, Foresry,& Fishing

Reail rade &Accommodaion

Renal, Hiring, &Real Esae Services

Manuacuring

ECONOMY


15/52

15

ECONOMY

Prices and Costs

Consumer price inflaion declined over he early 1990s

as moneary policy direced a mainaining price sabiliy

(inroduced in 1989) ook effec. Since Sepember 1991, inflaionhas averaged 2.2% per annum.

Annual CPI inflaion increased significanly in he December

quarer 2010 as an increase in he rae o goods and services ax

(GS) rom 12.5% o 15% on 1 Ocober 2010 was passed on o

consumers. Te CPI rose 2.3% in he quarer, aking annual inflaion

o 4.0%, well above he arge range. Inflaion increased urher

during 2011, rising o 4.6% on an annual basis in Sepember

beore alling o 1.8% in he year o December 2011. Tis all was

mainly he resul o he GS rae rise alling ou o he calculaion,

bu alls in ood and communicaion prices also conribued.

Over 2012, CPI inflaion coninued o ease, wih prices rising only

0.2% in he December 2012 quarer, bringing annual inflaion

down o 0.9%. Tis was largely a reflecion o he srong New

Zealand Dollar and alling commodiy prices which depressed

radables prices. Annual inflaion is expeced o increase owardshe mid-poin o he band over 2013, in line wih he economic

recovery, as well as capaciy consrains associaed wih he

Canerbury rebuild.

Growh in he index o salary and ordinary-ime wage raes

reached a record 3.9% in he year o Sepember 2008 beore

declining rapidly over he ollowing wo years o jus 1.5% growh

a he sar o 2010. Since hen i has crep up, reaching 1.9% or

he year ended Sepember 2012.

Te ollowing able shows on a quarerly basis he erms o rade

Index, he Producers Price Index, he Consumers Price Index and

he Labour Cos Index and, in each case, he percenage change

over he same quarer o he previous year.

able 7 Price and Cos Indices

Year Month

erms of

rade Index1Annual %

Change

Producers

Price Index2Annual %

Change

Consumers

Price Index3Annual %

Change

Labour Cost

Index4Annual %

Change

2008

March 1,247 11.6 922 7.3 1,044 3.4 964 3.4

June 1,242 10.7 977 12.3 1,061 4.0 972 3.6

Sepember 1,230 5.8 1,013 13.6 1,077 5.1 984 3.9

December 1,218 1.8 990 9.7 1,072 3.4 991 3.6

2009

March 1,185 (5.0) 965 4.7 1,075 3.0 997 3.4

June 1,074 (13.5) 965 (1.2) 1,081 1.9 1,000 2.9Sepember 1,057 (14.1) 954 (5.8) 1,095 1.7 1,005 2.1

December 1,118 (8.2) 958 (3.2) 1,093 2.0 1,009 1.8

2010

March 1,186 0.1 971 0.6 1,097 2.0 1,012 1.5

June 1,210 12.7 984 2.0 1,099 1.7 1,016 1.6

Sepember 1,246 17.9 991 3.8 1,111 1.5 1,021 1.6

December 1,256 12.3 1,000 4.4 1,137 4.0 1,026 1.7

2011 March 1,266 6.7 1,022 5.3 1,146 4.5 1,030 1.8

June 1,296 7.1 1,031 4.8 1,157 5.3 1,035 1.9

Sepember 1,288 3.4 1,037 4.7 1,162 4.6 1,041 2.0

December 1,269 1.0 1,042 4.2 1,158 1.8 1,047 2.0

2012 March 1,240 (2.1) 1,045 2.3 1,164 1.6 1,051 2.0

June 1,209 (6.7) 1,051 1.9 1,168 1.0 1,056 2.0

Sepember 1,170 (9.2) 1,040 0.3 1,171 0.8 1,061 1.9

December N/A N/A 1,037 (0.5) 1,169 0.9 N/A N/A

1 Base: June quarer 2002 = 1,000.

2 All indusry inpus. Base: December quarer 2010 = 1,000.

3 Base: June quarer 2006 = 1,000.

4 All indusry ordinary-ime salary and wage. Base: June quarer 2009 = 1,000.



16/52

16

Labour Markets

New Zealand has a decenralised labour marke. Enerprise

bargaining predominaes in he negoiaion o he erms and

condiions o employmen. Te Employmen Relaions Ac 2000provides he sauory ramework ha suppors he building o

producive employmen relaionships. Te legislaion proecs he

inegriy o individual choice in erms o reedom o associaion

and union membership and he choice o collecive and

individual employmen agreemens. I also promoes collecive

bargaining, requires he paries o employmen relaionships

(unions, individual employees and employers) o deal wih each

oher in good aih and promoes mediaion o assis in he early

resoluion o workplace dispues.

In 2010, he Governmen made several amendmens o he Ac

in order o increase choice and flexibiliy, ensure he balanceo airness beween employers and employees is appropriae

or boh paries, improve he operaion and efficiency o he

legislaion and reduce is compliance coss.

A se o minimum employmen sandards also underpins

employmen relaionships and proecs he more disadvanaged

in he workorce. Relevan legislaion includes he Minimum Wage

Ac, he Equal Pay Ac, he Holidays Ac and he Parenal Leave

and Employmen Proecion Ac.

Employmen grew srongly prior o 2009, wih annual growh

averaging 2.4% over he our years o Sepember 2008.

During 2009, he lagged effecs o he weakening economyflowed hrough o lower demand or labour, wih employmen

conracing 2.3% in he year o December 2009.

As he economy cooled, he unemploymen rae increased sharply

rom a record low o 3.5% in December 2007 o 7.0% in December

2009. Since hen, he unemploymen rae has flucuaed beween6.1% and 7.3%, in par owing o a volaile paricipaion rae. Te

Canerbury earhquakes iniially had a negaive impac on he

labour marke, wih employmen alling 8.0% in he region in

he year o Sepember 2011. Despie his, employmen overall

was up 1.1% in he year o Sepember 2011. More recenly,

labour marke saisics or Canerbury have srenghened wih

employmen rising 2.9% in he year o Sepember 2012. As he

Canerbury rebuild gahers pace, employmen is expeced o pick

up more subsanially.

Annual growh in labour produciviy peaked in March 2008 a

3.1% beore conracing by 4.2% in March 2009. Produciviygrowh rebounded in he year o March 2010 (up 2.4%) as

employers absorbed underuilised labour, bu remained negaive

or mos o 2010 and 2011. Te decline in annual produciviy

growh coincided wih sof GDP growh over his period, which

resrained firms demand or labour. Modes GDP growh and

weak employmen growh saw labour produciviy grow srongly

over 2012 wih annual growh reaching 2.9% in he year o June

2012. I is expeced o improve in 2013 as he economy coninues

o recover and he Canerbury rebuild gains momenum.

New Zealands relaively high rae o job urnover and o firm

creaion and desrucion suggess ha here are ew regulaory

and insiuional impedimens o employmen, invesmen and

innovaion. Governmen policy is direced o building up skill

levels in he workorce and o addressing skill shorages.

ECONOMY

Te Gammack Mountains, Mackenzie Country, with typical dry tussock vegetation.

Andris Apse


17/52

17

Primary IndustriesTe agriculural, horiculural, oresry, mining and fishing

indusries play a undamenally imporan role in New Zealands

economy, paricularly in he expor secor and in employmen.

Overall, he primary secor accouns or 7.4% o GDP and

conribues over 50% o New Zealands oal expor earnings.

Agriculure and Horiculure

Agriculure direcly accouns or around 4.0% o GDP, while he

processing o ood, beverage and obacco producs accouns or

a urher 5.0%. Downsream aciviies, including ransporaion,

rural financing and reailing relaed o agriculural producion,

also make imporan conribuions o GDP.

Recen flucuaions in commodiy (paricularly dairy) prices

have highlighed he imporance ha agriculure plays in he

New Zealand economy. Rising demand rom developing counries

and supply consrains helped push dairy prices o heir highes

ever level in boh world and New Zealand-dollar erms in lae

2007. As a resul, primary secor incomes were boosed, which

in urn lifed spending and invesmen, spilling over o he wider

economy.

Prices or New Zealands key expor commodiies urned down in

mid-2008, gahering momenum as he financial crisis inensified

and placing pressure on already sof domesic demand. However,

commodiy prices recovered srongly during 2009 and over he

second hal o 2010 and firs hal o 2011 as global growh and

demand reurned. New Zealands major dairy exporer, Fonerra,

was able o increase orecas payous o armers on heexpecaions o susained high prices. Over he second hal o

2011 and firs hal o 2012, commodiy prices came off heir highs

as renewed euro area concerns emerged, leading o demand

worries. In lae 2012, Fonerra lowered orecas payous owing o

able 8 Gross Agriculural Producion1

Te ollowing able shows sales o he principal caegories o agriculural producs or he years indicaed and as a percenage o

agriculural sales or 2012.

Year ended 31 March

2009 2010 2011 2012 2012

(dollar amouns in millions) % o oal

Dairy 6,608 7,567 9,819 9,790 45.1Frui 2,123 2,270 2,218 2,354 10.8

Sheepmea 2,153 2,083 2,009 2,249 10.4

Cale 2,066 1,828 2,114 2,186 10.1

Vegeables 926 915 1,035 1,019 4.7

Sales o live animals 741 686 728 784 3.6

Crops and seeds 727 738 769 724 3.3

Wool 405 375 469 608 2.8

Oher arming 499 462 490 528 2.4

Non-arm income 378 393 455 469 2.2

Oher horiculure 273 270 305 300 1.4

Agriculural services 211 219 254 262 1.2

Poulry/eggs 179 183 194 214 1.0

Pigs 182 181 165 187 0.9

Value o livesock change 30 28 29 32 0.1

otal Gross Revenue 17,501 18,197 21,056 21,706 100.0

1 All daa esimaed.

Source: Minisry or Primary Indusries

Indusr ia l Srucure and Pr inc ipa l Economic Secors


18/52

INDUSTRIAL STRUCTURE AND PRINCIPAL ECONOMIC SECTORS

18

he coninuing srengh o he New Zealand dollar. Neverheless,

commodiy prices or New Zealands key expors remain a

near-hisorical highs.

Horiculural producs have become increasingly imporan, wihhe principal crops being wine and kiwirui. Oher significan

expor producs include apples and pears, resh and processed

vegeables, and seeds.

Foresry

Foresry and logging makes up around 1.1% o GDP and is he

basis o an imporan expor indusry. Almos 70% o wood rom

he planed producion oress is expored in a variey o orms,

including logs, wood chips, sawn imber, panel producs, pulp and

paper, and urher manuacured wooden producs, including

urniure.

For he year ended June 2012, he value o expors o oresry

producs was $4.3 billion, 10.0% o New Zealands oal

merchandise expors. China and Korea were he larges markes

or log expors a $939 million and $262 million respecively,

while India and Japan coninue o be imporan desinaions or

he expor o sawn imber.

New Zealands climae and soils are well-suied o he growh

o planed producion oress. Tese oress cover an area o

1.8 million hecares and produce over 99% o he counrys

wood. Radiaa pine, which makes up 90% o he planaion esae,

maures in 25 o 30 years, more han wice as as as in is naural

habia o Caliornia. Tis species has had considerable researchinvesmen and has demonsraed is versailiy or a wide range

o uses. Te second mos imporan species is Douglas fir, which

makes up 6% o he planed ores area.

New Zealands oal planed ores growing sock a 1 April

2008 was esimaed a 446 million cubic meres. For he year

ended June 2012, an esimaed 26.6 million cubic meres o wood

were harvesed rom producion oress, an increase o 3.2% rom

a year earlier. O his, 13 million cubic meres were expored as

logs and he balance was manuacured ino a range o producs,

including 3.9 million cubic meres o sawn imber, 2 million cubic

meres o wood panels (consising o fibreboard, veneer, plywoodand paricleboard) and 1.5 million onnes o wood pulp (made

rom harvesed logs plus residues rom sawmills).

A relaively sable harves o 26 o 28 million cubic meres a year

is orecas or he period o 2016. Forecass sugges availabiliy

could increase by an addiional 10 million cubic meres annually

by 2023. Marke condiions and logisical consrains (availabiliy

o logging crews, ranspor and wood processing capaciy) will

dicae how quickly he addiional wood is harvesed.

oal oresry expor revenues decreased 5.5% in he year o

June 2012, owing o a all in expor revenue across mos oresry

produc groups. Tis largely reflecs lower produc prices

compared o he previous year when prices or New Zealand logs

in Asian markes peaked a very high levels.

Fishing

New Zealand has an Exclusive Economic Zone (EEZ) o 4.1 millionsquare kilomeres supporing a wide variey o inshore fish,

some large deep-waer fin fish, squid and una. New Zealands

unpollued coasal waers are also well-suied o aquaculure. Te

main species armed are Pacific oyser, green-lipped mussels and

quinna salmon.

Fishing is a major New Zealand indusry and an imporan

merchandise expor earner. Fish and oher seaood accouned or

$1.5 billion in expor revenues in he year ended June 2012, a

1.2% decrease rom he previous year.

Te mos imporan expor species are green-lipped mussels,

hoki, mackerel, squid and una. Smaller volume bu high value

expors are rock lobser, abalone and orange roughy. Te main

expor markes are China, Hong Kong, Ausralia, he Unied Saes

and Japan.

Te conservaion and managemen o he fisheries is based on

a quoa managemen sysem designed o proec he uure

susainabiliy o he fisheries while aciliaing heir opimum

economic use. Te sysem uses markes, ogeher wih scienific

assessmens o fish socks, o allocae fishing righs wihou

arbirarily resricing fishing mehods.

Energy and MineralsNew Zealand has significan naural energy resources, wih

good reserves o coal, naural gas and oil/condensae, exensive

geohermal fields and a geography and climae which have

suppored subsanial hydro-elecric developmen. Te main

minerals mined, in addiion o coal, are gold, silver, iron sands,

various indusrial minerals and gravel or consrucion.

Programmes or he exploiaion o New Zealands energy

resources were acceleraed afer he firs oil shock in 1973. Oil

and gas exploraion was increased and energy conservaion

programmes were developed and promoed. As a resul,

New Zealand is able o mee a significan proporion o is overall

energy requiremens.

Tere is a renewed ineres in he developmen o energy and

mineral resources o conribue o economic growh. Since

2012, an annual permiing round has been used exclusively or

allocaing peroleum exploraion permis. Te Exclusive Economic

Zone and Coninenal Shel Ac was passed in 2012 and requires

all peroleum and mineral operaions wihin he exclusive

economic zone and coninenal shel o seek consen rom he

Environmenal Proecion Auhoriy. Wihin New Zealands

erriorial waers, operaors mus be permied hrough he

Resource Managemen Ac.


19/52


19

Natural Gas: Naural gas is currenly produced rom 17 fields

and wells in he aranaki region o he Norh Island, wih

producion dominaed by he inshore Pohokura oil and gas field,

he long-sanding offshore Maui field and smaller onshore fields.

Tere are hree main uses or gas in New Zealand: elecriciy

generaion, perochemical producion and uel or indusrial

secors.

Gross naural gas producion was 190 peajoules in he year o

June 2012. Naural gas producion had declined sharply afer

he Maui field peaked in 2001, beore sabilising hrough o

early 2007. Producion has since increased wih he coninued

developmen o new smaller and more diverse fields and he

inroducion o he Pohokura field in 2006. Te offshore Kupe

oil and gas field, which was brough ino producion in 2009, has

been a significan conribuor.

Oil: New Zealands crude oil producion was 93.7 peajoules in

he year o June 2012 (around double ha produced in 2006), o

which 94% was expored. New Zealand expors ligh crudes, while

imporing heavier crudes suied o is refining plan a Marsden

Poin. While New Zealand is sill a ne imporer o oil, crude oil

expors are becoming increasingly imporan wih he value o

crude oil expors accouning or 4.1% o oal expors in he year

o Ocober 2012.

Crude peroleum producion has been increasing since he

second hal o 2006 when he Pohokara field commenced

producion. Te ui Area Oil Fields, locaed in he offshore

aranaki basin, commenced commercial producion in he middle

o 2007 and produced 32.5% o New Zealands oil in he 2009

year. New Zealands producion o crude oil was urher boosed

in lae 2008 as Maari, a new field also locaed off he aranaki

coas, sared producion. Te Maari field reached ull producion

in June 2009, around he same ime ha producion rom he ui

fields began o decline.

Coal: Coal is New Zealands mos abundan energy resource

wih oal in-ground resources esimaed a abou 15 billion

onnes. O his, 8.6 billion onnes is judged o be economically

recoverable rom 42 coalfields. O his amoun, 80% is relaively

low-grade lignie, 15% is middle-grade sub-biuminous and he

remaining 5% is biuminous. Lignie is used mainly or indusrial

uel and sub-biuminous coal or indusrial uel, seel manuacure,

elecriciy generaion and domesic heaing. Biuminous coal,

which is ypically very low ash, low sulphur coking coal, is mainly

expored or meallurgical applicaions.

In he June 2012 year, oal coal producion was 5.1 million onnes,

a 3.5% increase over he June 2011 year. Coal producion is

cenred on he Waikao (mainly or several major indusrial users

and he Hunly power saion), he Wes Coas (mainly or expor)

and Oago/Souhland (mainly or local indusrial markes).

Manufacturing

New Zealands manuacuring indusries make an imporan

conribuion o he naional economy. In he year ended June

2012, manuacuring secor oupu accouned or 13.5% o

real GDP. Te proporion o he labour orce employed in

manuacuring was around 10%. Primary secor processing (ood

and oresry) makes up a significan proporion o he secor.

Te ood manuacuring indusry produces high-qualiy producs

or boh he domesic and expor markes. Tis indusry enjoys

he advanages o a naural environmen ha is highly conducive

o pasoral agriculure, an absence o major agriculural diseases,

he poenial or year-round producion and an inernaional

repuaion or excellence. Te indusry had sales o over

$41.1 billion in he year ended June 2012, including more han

$27 billion or mea and dairy producs. Expors o mea and

dairy producs amouned o abou $17 billion in he year ended

Sepember 2012.

able 9 Operaing Income o he Manuacuring Secor by Indusry Group

Te ollowing able ses ou he sales o goods and services in he manuacuring secor or he five years ended 30 Sepember 2012.

Industry Division

Year ended 30 September

2008 2009 2010 2011 2012 2012(dollar amouns in millions) % o oal

Food

Mea and dairy 24,491 25,503 23,865 27,639 27,705 30.5

Oher ood, beverages and obacco 12,874 13,083 13,122 13,256 13,579 14.9

Machinery and equipmen 9,676 9,362 8,567 9,330 9,637 10.6

Meal produc 9,912 9,569 8,740 9,304 9,378 10.3

Peroleum and coal produc 7,130 6,839 6,217 7,136 7,923 8.7

Chemical, polymer and rubber produc 7,322 7,361 6,832 7,161 7,701 8.5

Wood and paper produc 7,888 7,233 7,326 7,503 7,352 8.1

Non-meallic mineral produc 3,015 2,780 2,539 2,451 2,498 2.7

exile, leaher, clohing and oowear 2,584 2,305 2,145 2,075 2,073 2.3

Prining 1,892 1,743 1,721 1,648 1,641 1.8

Furniure and oher manuacuring 1,842 1,683 1,684 1,615 1,565 1.7otal 87,600 88,382 82,155 88,501 90,898 100.0

Manuacuring index1 119 102 110 109 110

1 Base: June quarer 1996 = 100.



20/52


20

Oupu in he manuacuring secor declined hroughou mos

o 2006 and 2007, leaving i vulnerable o urher conracion

as prospecs or he global economy deerioraed rapidly wih

he onse o he GFC in lae 2008. Te impac o weaker global

demand and uncerainy over uure global economic condiions

flowed hrough o he manuacuring secor, wih oupu shrinking

12.6% on an average annual basis in he year o Sepember 2009.

Manuacuring recovered somewha over lae 2010 and early

2011, despie he Canerbury earhquakes, rising 1.8% on a

quarerly basis in he Sepember 2011 quarer. Manuacuring

oupu bounced back in he March quarer o 2012, rising 1.9%

owing o good arming condiions which provided a boos o

ood processing. Oupu coninued o grow in he June quarer o

2012, albei a a slower rae, rising 0.8% in he quarer.

Service IndustriesService indusries make up a large proporion o he economy,

accouning or over wo-hirds o GDP. Te secor recorded

srong growh beween 2000 and 2007, wih annual growh

averaging 3.9%. As he New Zealand economy enered recession

in 2008, services growh slowed, bu no o he exen o oher

secors. Wih services expanding a a more rapid rae han oher

areas o he economy, he secor has increased is share o GDP

rom 66% in 2004 o 69% in 2012. Expor-relaed aciviies such as

ourism and primary secor services inpus play an imporan par

in rends in his secor.

Inrasrucure

In early 2009, he Governmen esablished a Naional

Inrasrucure Uni wihin he reasury o ake a naional overview

o inrasrucure prioriies by providing cross-governmen

coordinaion, planning and experise. Te Uni develops is policy

advice in conjuncion wih an Advisory Board which is made up o

a mix o privae and public secor experise.

Te Uni is also responsible or promulgaing robus and

reliable cross-governmen rameworks or inrasrucure projec

appraisal and capial asse managemen and or monioring he

implemenaion and use o hese rameworks. As par o his work,

he Uni has released Privae Public Parnership (PPP) guidelinesor use by governmen agencies and provides ongoing suppor

or agencies and deparmens involved in PPPs.

On 4 July 2011, he Uni released he second Naional

Inrasrucure Plan, which seeks o provide a common direcion

or he planning, unding, building and use o all economic and

social inrasrucure. I covers he ranspor, elecommunicaions,

energy, waer and social inrasrucure secors. Te purpose

o he plan is o improve invesmen cerainy or businesses

by increasing confidence in curren and uure inrasrucure

provision. Trough he plan, he Governmen is seeking o achieve

beer use o exising inrasrucure, and beer allocaion o newinvesmen. Further information is available on the Infrastructure

website at www.infrastructure.govt.nz . Te nex Inrasrucure Plan

is expeced in 2014.

ranspor

ranspor is a major componen o economic aciviy in

New Zealand. Te counrys ranspor sysem owes is

characerisics, no only o New Zealands dependence on exernal

rade and remoeness rom many o is rading parners, bu also

o is rugged errain and scaered populaion and he division

o he counry ino wo main islands spanning 2,011 kilomeres

in lengh. As a resul, he esablishmen o a comprehensive

nework o roads (around 93,000 kilomeres) and railways (4,000

kilomeres) linked o pors and airpors has involved capial coss

ha are high in relaion o he size o he populaion. However, he

efficiency o he counrys inernal ranspor sysem has played a

criical role in New Zealands economic growh.

Much o his ranspor inrasrucure was originally developed

and operaed by governmen-owned monopolies. oday,

he ranspor secor is largely deregulaed and legislaive

barriers o compeiion have been removed. Many previously

governmen-owned operaions are now privaely owned.

Roading: Te allocaion o unding and he managemen o sae

highway works are managed by a Crown eniy, he New Zealand

ranspor Agency. Consrucion and mainenance work is

conraced o privae secor companies.

Land ranspor inrasrucure and is mainenance are unded

primarily rom disance-based charges or diesel vehicles, excise

duies on perol and moor vehicle regisraion charges. More

recenly, he Governmen has appropriaed addiional unding

o accelerae he consrucion o new roads and he provision o

public ranspor.

olling schemes or new highways are permied where his is

deemed an appropriae unding arrangemen. Te capial or

hese schemes can come rom eiher he public unding body, or

rom privae providers in parnership wih he Governmen.

Railways: New Zealands railway sysem connecs all major

populaion cenres and includes rail erries beween he Norh

and Souh Islands. Te sysem was mainained and operaed

under governmen ownership unil 1993, when i was privaised.

Te Governmen has since purchased back boh he neworkinrasrucure and rail services. Te naional rail sysem operaes

as KiwiRail. In 2010, he Governmen commied $750 million

over hree years (provided in $250 million ranches, subjec o

approved business cases) o suppor a urnaround plan or

KiwiRail o become a ully commercial rail business over ime.

While he Governmen, hrough KiwiRail, owns mos rail

inrasrucure and rolling sock, Auckland and Wellingon

regional auhoriies also own some rolling sock which is used by

conraced providers o meropolian rail services. In 2011, he

Governmen confirmed unding packages o suppor he upgrade

and mainenance o meropolian rolling sock and associaed

nework inrasrucure.


21/52


21

Shipping: Niney-nine percen o New Zealands oal

inernaional rade by volume is carried by sea, wih around

30 global and regional shipping lines calling a New Zealand

pors. Coasal shipping services, operaed by boh local and

inernaional shipping companies, provide inra- and iner-island

links and play a key role in he disribuion o bulk cargos such as

peroleum producs and cemen.

Por companies esablished under he Por Companies Ac

1988 operae 13 o New Zealands 14 commercial pors. Tese

companies operae a arms lengh rom heir predominanly local

auhoriy owners, alhough our are parly privaised and lised on

he New Zealand Sock Exchange.

New Zealands shipping policy reflecs he philosophy ha he

counrys ineress are bes served by being a ship-using raher

han a ship-operaing naion. Te policy seeks o ensure or

New Zealand exporers and shippers unresriced access o he

carrier o heir choice and o he benefis o air compeiion

among carriers.

Te Mariime ranspor Ac 1994 regulaes ship saey, mariime

liabiliy and marine environmenal proecion.

Civil Aviation: New Zealand is one o he mos aviaion-oriened

naions in he world. In a populaion o jus over 4.4 million here

are over 10,000 licensed pilos and more han 4,400 aircraf.

Large aircraf are used or inernaional and domesic reigh and

passenger ranspor. Ligh aircraf, including helicopers, are used

exensively in agriculure, oresry and ourism.

New Zealand allows up o 100% oreign ownership o domesic

airlines and here is no domesic air services licensing. Air

New Zealand is he major domesic operaor on main runk and

regional roues, wih some main runk services operaed by Jesar.

New Zealand has around 50 ormal air services agreemens

wih oreign governmens. Te Governmens inernaional air

ranspor policy is o maximise economic benefi o New Zealand,

including rade and ourism, consisen wih oreign policy and

sraegic consideraions. Currenly, around 40 inernaional

airlines, including Air New Zealand, link New Zealand wih he res

o he world wih boh reigh and passenger services. Jus underhal o hese are markeing carriers under code-share agreemens.

Inernaional flighs operae rom a number o inernaional

airpors, o which Auckland, Wellingon and Chrischurch are

he mos significan. Queensown and Dunedin are secondary

airpors used or some inernaional flighs, mainly rans-asman.

Te hree major inernaional airpors are auonomous companies.

Auckland Inernaional Airpor is a publicly lised company and

Wellingon Inernaional Airpor is wo-hirds owned by a publicly

lised company, while Chrischurch Inernaional Airpor is joinly

owned by he Chrischurch Ciy Council and he Governmen.

Te Governmen owns around 73% o Air New Zealand, having

purchased shares in he company in 2001 ollowing a period o

exernal shocks or he airline. Air New Zealand coninues o be

a publicly lised company on he New Zealand Sock Exchange.

Since 2001, Air New Zealand has resrucured is operaions,

which has had he effec o resoring is balance shee o a sound

financial posiion. Te airline has also made profis in each financial

year since 2001 and is currenly engaged in a flee replacemen

programme which is expeced o be compleed in 2016.

Te Governmen has signalled is inenion o dives a porion o

is shareholding in Air New Zealand bu wi ll reain a leas 51% o

he company.

ourism

ourism is one o he larges single sources o oreign-exchange

revenue and a major growh indusry in New Zealand. In heyear o March 2012, inernaional ouris expendiure amouned

o $9.6 billion, an increase o 1.6% on he previous year. Te

counrys scenery, naural environmen and a range o oudoor

aciviies make New Zealand a popular ouris desinaion. oal

visior arrivals amouned o 2,563,000 in he year o Ocober

2012.

Ausralia is New Zealands closes marke and by ar he larges

source o overseas visior arrivals a 1,156,000 (45% o he oal)

in he year ending Ocober 2012. Ausralian arrivals were down

by 17% rom a year earlier.

Afer Ausralia, he nex larges markes are he Unied Kingdom(194,000 or 7.6% o he oal), China (191,000 or 7.5% o he

oal) and he Unied Saes (179,000 or 7% o he oal).

Visior arrivals rom a number o Asian markes have also grown

srongly over he pas decade, albei wih periods o emporary

weakness in he ace o higher oil prices and concerns over he

H1N1 virus in 2009.

ourism arrivals are sensiive o he New Zealand-dollar exchange

rae and ully respond around 15 monhs afer changes. While he

New Zealand dollar is expeced o remain elevaed over 2013, a

gradual depreciaion is expeced in he coming years. Te Rugby

World Cup, held in New Zealand over Sepember and Ocober

2011, emporarily boosed inernaional visior arrivals, bu

numbers reurned o normal levels in subsequen monhs.

Communicaions

New Zealand was he firs counry o open is enire

elecommunicaions marke o compeiive enry in 1989.

elecom New Zealand was privaised in Augus 1990, and oday all

major compeiors are privaely owned. Te elecommunicaions

marke is made up o hree major players (Chorus, elecom and

Vodaone/elsra Clear) and a number o smaller providers.

New Zealand has good broadband access availabiliy (over 95% odwellings) and significan broadband inrasrucure compeiion


22/52


22

in paricular areas. Te Governmen is invesing $1.5 billion

hrough he Ulra-Fas Broadband (UFB) Iniiaive o accelerae

he roll-ou o fibre-based broadband o 75% o New Zealanders

by 2019. Tis invesmen is being more han mached by

invesmen rom privae secor parners. Te Iniiaive prioriises

businesses, schools and healh services and cerain ranches o

residenial areas. A relaed Rural Broadband Iniiaive is aimed a

improving broadband availabiliy ouside he UFB area. Chorus

and Vodaone are he major RBI providers.

Te elecommunicaions secor has been hrough a period o

significan regulaory reorm in recen years. Tis includes a

review o he elecommunicaions Ac in 200506, resuling in

he opening up o elecoms exchanges o compeiors hrough

he process o local-loop unbundling. Tis was ollowed by he

operaional separaion o elecom ino hree disinc business

divisions as a urher measure o increase compeiion.

Legislaion was enaced in 2011 o allow or he complee

demerger o elecom ino wo separae companies, a nework

generaor and a reailer. Regulaory provisions apply o he

dominan nework operaor, Chorus Limied, wih regard o he

nework operaion and o boh Chorus and elecom wih regard

o he elecommunicaions Service Obligaions. In November

2011, shareholders voed o separae elecom New Zealand rom

Chorus in order o paricipae in he Governmens UFB iniiaive.

Chorus and elecom New Zealand became separaely lised

companies in December 2011.

A elecommunicaions Commissioner wihin he Commerce

Commission adminisers regulaed elecommunicaion services,

which include nework inerconnecion, elephone number

porabiliy and wholesale elecommunicaion services. Te

Commissioners key uncions are o resolve dispues over

regulaed services, o repor o he Miniser o Communicaions

on he desirabiliy o regulaing addiional services and o

calculae and allocae he elecommunicaions developmen levy.

Posal and courier delivery services are provided by New Zealand

Pos Limied, a commercially-run Sae-Owned Enerprise (SOE),

and a range o privae providers.

New Zealand Pos used is reail nework o expand ino reail

banking in 2002, seing up Kiwibank, wih a urher expansion

ino business banking in 2005. New Zealand Pos did no have

he resources o und he esablishmen o he bank, so he

Governmen made a one-off invesmen o $78.2 million in

New Zealand Pos o und he esablishmen expenses and

capial expendiure involved, and o ensure here was sufficien

capial o mee RBNZ requiremens. Since hen, New Zealand

Pos has made urher capial injecions o bring Kiwibanks share

capial o $360 million a 30 June 2012. Te Governmen neiher

guaranees he bank nor subsidises is ongoing operaions.

Kiwibank announced an afer-ax profi o $79 million or he year

ended 30 June 2012 compared wih a profi o $21 million or he

previous year.

wo major naional radio neworks, as well as a nework ha relays

parliamenary proceedings, are provided by Radio New ZealandLimied, a Crown eniy operaing under a non-commercial

charer. Tere are numerous privae radio saions.

elevision New Zealand Limied (VNZ), he Sae-owned

elevision broadcaser, is a Crown company. VNZ provides

wo naional ree-o-air elevision channels broadcas in boh

analogue and digial plus wo addiional digial channels. VNZ

inends o replace analogue ransmission compleely wihin he

nex ew years. Te sae also unds he Mori elevision Service,

a sauory corporaion, o promoe Mori language and culure.

Privae elevision operaors provide a number o oher naional

and regional channels. Digial and analogue pay V services are

also available.

Tere are five major daily meropolian newspapers in he main

cenres and numerous provincial and communiy newspapers,

all o which are privaely owned. In addiion, here is a naional

weekly business paper, hree Sunday newspapers, a number o

wire services and a growing number o inerne news services

(including offerings rom he major newspaper groups) and

blogsies.

Screen Indusry

Te New Zealand Film Commission was esablished in 1978 o

finance disincly New Zealand films, wih he aim o reachingsignifican New Zealand audiences and producing high reurns

on invesmen in boh financial and culural erms. More han

200 eaure films have been made in New Zealand since he

Commission was esablished. Around hal o hese have received

Film Commission finance, while he remainder have been

financed by local and, increasingly, by major offshore producion

companies.

New Zealands screen indusry coninues o gain inernaional

prominence ollowing he success o several big budge

producions filmed or produced in New Zealand, such as he Lord

o he Rings rilogy, King Kong and Avaar, as well as numerousmedium and small budge films produced by New Zealand and

offshore companies. Filming on he hree-movie Lord o he Rings

prequel, Te Hobbi, commenced in Wellingon in March 2011.

Te firs movie, Te Hobbi An Unexpeced Journey, premiered

in Wellingon in December 2012.

Te New Zealand screen indusry recorded gross revenue

o $2.99 billion in he year ending March 2011. Te screen

producion indusry is characerised by a large number o small

reelancers and conracors working boh independenly and in

coordinaion wih larger producion and broadcasing companies.


23/52

23

External radeExernal rade is o undamenal imporance o New Zealand.

Primary secor-based expors and commodiies remain imporan

sources o expor receips, while expors o services and

manuacured producs also provide a significan conribuion.

Tis, ogeher wih a reliance on impors o raw maerials and

capial equipmen or indusry, makes New Zealand srongly

rade-oriened.

Merchandise rade

Afer a record merchandise rade defici o $7.3 billion in early

2006, srong growh in he erms o rade helped reduce he

defici o $5.2 billion in he year o Sepember 2008. Weakdomesic demand, uncerainy surrounding he global economic

environmen and a sharp depreciaion in he New Zealand dollar

produced a large drop in impored goods a he beginning o

2009. Domesic demand picked up again in 2010 as he domesic

economy recovered rom recession.

Expors held up well hrough he GFC, mainly owing o commodiy

demand rom China, which coninued o grow srongly. Expor

values surged o new highs in 2011, wih he annual oal up 11%

in he June quarer rom he previous year. Tis resuled in an

improving merchandise rade balance, reaching a surplus in he

12 monhs o April 2010 and remaining in surplus hroughou heres o 2011. Te merchandise rade balance hen deerioraed

o a defici o 1.3 billion in he year o Ocober 2012 owing o a

all in commodiy prices and a decline in expor values rom year-

earlier levels.

rade in Services

rade in services is dominaed by ouris flows. Te annual level

o services expor volumes has been in decline since 2005, wih

he high New Zealand dollar and he recession ollowing he

global financial crisis having an adverse impac on visor arrivals

rom high-spending counries, including he Unied Saes, Japan

and Europe. Arrivals rom Ausralia have increased, resuling in

higher oal visior numbers bu lower average expendiure. Onan annual basis, real services expors rose 1.7% in he year o June

2012.

Te services balance recorded in he Balance o Paymens peaked

a a surplus o $1,977 million in he year o Sepember 2003. Te

slowdown in inbound ourism and srong growh in he number

o New Zealanders ravelling overseas saw he serv ices balance all

o a defici o $741 million in he year o March 2009 beore

recovering o a surplus o $337 million in he year o March 2010.

Since hen, a defici has reurned, increasing o $792 million in he

year o June 2012. Te high New Zealand dollar which has

boosed services impors has been a major conribuing acor inhe deerioraion.

able 10 Balance o Exernal Merchandise rade1

Te ollowing able records he oal value o expors and impors o goods since 2008.

Year to

October

Exports Imports Balance of rade Exports as % of Imports


2008 42,431 47,700 (5,269) 89.0

2009 40,718 41,894 (1,176) 97.2

2010 42,513 41,256 1,256 103.0

2011 47,002 46,313 688 101.5

2012 46,373 47,706 (1,334) 97.2

1 Includes re-expors.


Exerna l Secor


24/52

EXTERNAL SECTOR

24

erms o rade

Te erms o rade reached new highs during 2008, as high

commodiy prices were refleced in expor prices, paricularly

or dairy producs. Te erms o rade ell significanly during

2009, reflecing he impacs o he GFC on commodiy prices

and demand. Expor prices ell much more han impor prices. As

he global recovery commenced, he erms o rade recovered,

hiing new highs in he June 2011 quarer. In he Sepember

quarer 2012, he erms o rade ell 9.2% rom year-earlier levels

as weak global demand led o a sharp decline in produc prices

received by New Zealand exporers. Te goods erms o rade are

expeced o weaken urher in he final quarer o 2012 beore

rising hereafer as he demand or New Zealands commodiy

expors is expeced o ousrip global supply. able 11 shows he

expor and impor price indices, he overall erms o rade index

and he annual percenage change in each.

able 11 erms o rade Indices

Export Price

Index1Annual %

Change

Import Price

Index1Annual %

Change

erms of rade

Ind

financial and economic overview of newzealand

Documents