International Trade in New Zealand

News Related to International Trade in New Zealand

Business outline for New Zealand

Main Industry Sectors

New Zealand is one of the smallest economies of the OECD and it is still heavily dependent on agricultural products. Agriculture is New Zealand's main source of exports. In 2008, dairy products accounted for 21% of New Zealand's total exports. The other main agricultural products that New Zealand exports are meat, wood, fruit and fishing products. New Zealand also has a thriving wine industry. The country is rich in many natural resources, in particular, gas, oil and coal.

The services sector accounts for more than two-thirds of the GDP and employs nearly 65% of the workforce. Tourism, which has been growing rapidly in recent years, is one of the country's most important sources of foreign-exchange revenues. The sectors of retail and wholesale trade, restaurants and hotels are major components of the economy of New Zealand, accounting for almost 25% of the services sector. The quality of the transport infrastructures play an essential role in the country's economic growth.

 

Economic Overview

After a growth rate of more than 2% in 2005, 2006, and 2007, New Zealand's GDP dropped in 2008-2009 due to the slowdown of the global economy. The country showed eighteen months of negative growth before its GDP became stable and restarted its growth again in 2010. This improvement was notably due to the establishment of an efficient monetary policy (a reduction of the key rate from 8.25% to 2.5%), an attractive fiscal policy, strong increase of the migratory balance which stimulated the domestic demand, a small revival in the sectors of real estate and services for companies, as well as a stimulus plan aiming in particular at employment, education, tourism, telecommunications, building and infrastructures. Activity was highly influenced by the dynamism of the primary sector, and in particular by the fishing, forestry and mining industries. Traditionally, New Zealand's economic growth factors are domestic demand and exports.   Its GDP per capita is in the process of catching up with the main western European economies. However, unemployment, which had been low since 2003, started to increase again due to the crisis.

At the end of 2010, the country was hit by a strong earthquake and the cost of reconstruction is estimated at NZD 2 billion, which will have a negative repercussion on the economy in 2011.  Nevertheless, the organization of the Rugby World's Cup in the same year should provide the country with positive financial gains.

 

FDI in Figures

The inflow of FDI is highly internationalized by OECD standards. In the 1990s, only Belgium and Ireland had a higher stock of FDI inflows (in percentage of the GDP) than New Zealand's. New Zealand's FDI stock, in relation to the GDP, is nearly the double of  that of Australia and Canada together, and three times larger than that of the Scandinavian countries. Most of the FDI inflow stock of New Zealand comes from Australia, the United Kingdom, the United States and the Netherlands. Japan, the APEC countries and the rest of Europe are small investors in New Zealand. FDI reached USD 8.1 billion in 2007, a figure that put New Zealand on the 45th place in the global ranking of attractive countries in terms of FDI, with 0.34% of the world's FDI. With the crisis, the FDI flows have petered out, mainly due to the decrease in imports of goods.  Despite that, the country maintains a high level of attractiveness and the investment flows should start to increase again in 2011.

 

FDI Government Measures

The government has put into place new tax incentives to promote FDI. The 2005 law on foreign investments was simplified and now facilitates foreign investgors' access to the domestic market. Nevertheless, the government amended the Overseas Investment Act so as to better protect "strategic infrastructures" in 2008.

 

Country Strong Points

New Zealand's efficient, market-driven economy delivers key benefits to investors, including company stability, numerous free-trade agreements and active government support for investment. The country's strong points are:

- An efficient market-oriented economy;
- A stable and secure environment with modern infrastructures, that supports robust and sophisticated telecommunications, roads, rail, sea and energy networks;
- A highly educated, flexible and multi-skilled workforce;
- Property costs that are amongst the most competitive in the Pacific;
- Free circulation of capital;
- A simple taxation system;
- 100% tax deductibility for corporate research and development;
- One of the world's lowest customs rate.
For further information on investments in New Zealand, refer to Invest New Zealand.

 

Country Weak Points

The main weak points are its geographical isolation, climate hazards and a limited local market.

 

Foreign Trade Overview

Foreign trade is an essential element in New Zealand's economy, which is currently, one of the most open economies in the world. The share of foreign trade in its GDP represents more than 60%. The country's economy is very trade-oriented, with exports of goods and services accounting for 33% of the total output.
The main trade partners (both for imports and exports) are Australia (most of the merchandise circulates freely between the two countries), the United States, Japan, China, Korea and the United Kingdom.
The trade balance attained a surplus again in the second quarter of 2009, in spite of the appreciation of the New Zealand's dollar (NZD) due to the increase in milk exports and the drop in prices and volume of imports.
The country's main exports are dairy products, meat, wool, machinery, fruits and peanuts. The most imported commodities are vehicles, machinery, mineral fuels and oil, electric and electronic equipment, and plastics.