•New Zealand’s economy expanded 2.4% year-on-year (YoY) in the first quarter of 2012, by far the fastest pace of growth since the early 2010.
•With a decline in international commodity prices, inflation slowed to 1% YoY in the second quarter of 2012, following respective growth rates of 1.6% and 1.8% in the two preceding quarters.
•New Zealand has been active in pursuing free trade agreements (FTAs). The New Zealand-Malaysia FTA was signed in October 2009, eventually eliminating tariffs on 99.5% of goods traded. It is pursuing FTA talks with Russia-Belarus-Kazakhstan, Korea, India, and the Gulf Cooperation Council.
•Under the Hong Kong–New Zealand closer economic partnership agreement (CEP) Agreement, the two sides agreed to conclude negotiations on an Investment Protocol by the end of 2012.
•Hong Kong’s exports to New Zealand dropped slightly by 0.7% YoY to US$243 million in the first six months of 2012, while imports went up by 23.3% YoY to US$307 million.
Current Economic Situation
New Zealand’s economy expanded 2.4% YoY in Q1 2012, up from 1.9% YoY in Q4 2011 and by far the quickest pace since the early 2010. The manufacturing, business services and agriculture sectors contributed to overall growth in January-March 2012, increasing by 2.6%, 9.8% and 5.4% respectively from the year-earlier period. The IMF expects GDP growth of 2.3% in 2012 and 3.2% in 2013 respectively on the back of further improvement in private consumption and fixed investment.
With a decline international commodity prices, inflation slowed to 1% YoY in Q2 2012, following respective YoY gains of 1.6% and 1.8% in the preceding two quarters. The IMF expects a moderate inflation rate of 2.1% in 2012, down from 4% in 2011. However, a rise in the tobacco excise tax and increasing demand for labour for post-earthquake rebuilding will exert upward pressure on consumer prices beyond 2012.
New Zealand saw a 1.9% export decline in Q1 2012. The country’s export growth was constrained by the economic slowdown in the Eurozone and Asia, with a substantial decrease in coal, crude petroleum, ores, minerals, and gas exports. Apart from that, imports growth was sustained on the back of demand for construction materials, in particular for post-earthquake reconstruction. The country is expected to run a sizeable current-account deficit in coming years.
The long-term policy of New Zealand is focused on boosting both economic performance and productivity. In October 2010, the government promulgated the long-debated tax reform by cutting the corporate tax to 28%, two percentage points below that in Australia. To diversify the economy, about US$1.5 billion was put into the research and development for the manufacturing and technology industry in the 2012/13 Budget.
New Zealand continued the commitment to rebuild Christchurch and the surrounding areas after the earthquakes in both September 2010 and February 2011. The government financed the reconstruction from the sale of state-owned assets to prevent the deterioration of fiscal deficit and public debt.
New Zealand is a member of the World Trade Organisation (WTO). Its tariff schedule is based on the Harmonised System (HS) of coding while custom valuation is based on the free on board (f.o.b.) value of imported goods. Most goods can be freely imported.
The New Zealand’s government has been working on the progressive reductions of trade barriers. New Zealand's average MFN applied tariff dropped from 4.1% in 2002 to 2.1% in 2009. Currently, textiles, processed foods, machinery, steel, and plastic products are subject to a 5% tariff rate, while clothing and footwear carpet are subject to a 10% tariff rate. These tariff rates will remain in force before 2015.
New Zealand has been active in pursuing free trade agreements (FTAs). FTAs have been signed with Australia, China, ASEAN, Singapore, Malaysia, and Thailand. Currently, the country is pursuing FTAs with Russia-Belarus-Kazakhstan, Korea, India, and the Gulf Cooperation Council.
Hong Kong and New Zealand signed a closer economic partnership agreement (CEP) in March 2010 for implementation in January 2011. In particular, the CEP contains measures to improve business flows and promote cooperation in a broad range of economic areas, with some legally-binding side agreements on labour and environment. In addition, both New Zealand and Hong Kong have undertaken to negotiate an Investment Protocol by the end of 2012. The CEP will enhance the role of Hong Kong as a platform for New Zealand doing regional business, in particular the booming market of the Chinese mainland.
New Zealand - Overview
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