EDANZ

Is the New Zealand Economy Growing?

According to the Economic Outlook of the OECD, New Zealand’s economic development is set to continue to grow ahead of other OECD members in the following years.

What are some indicators of the country’s growing economy?

For one, in 2017, the country enjoyed a solid economic growth brought about by international tourists and consumption and the service sector. Even with the last quarter of the year being plagued by a decline in business confidence and unfavorable weather conditions.

The service sector’s contribution came mostly from computer system designs, marketing, and advertising, while wholesale and retail services have also contributed.

In the last quarter of December, a rise in household spending was seen where households spent more on dine outs and groceries.

For the current year, the country’s economy is projected to continue its growth albeit a bit subdued. However, consumption will be expected to slow down and investments will overtake. House price increases will bring about moderate wealth gains, while government infrastructure spending will see a rise as well.

This slow pacing in economic growth can be attributed to new government policies which have taken place. This can be expected as there are still speculations following the recent government change, and this can be felt in the first half of this year. Nevertheless, based on news reports, the country’s economy has seen a rise in the second half of 2018.

In fact, this rise has exceeded expectations thanks to the agricultural sector recovering from last year’s unfavorable weather – the hottest recorded summer by far. The service sector remains one of the strongest contributors of the country’s economic growth.

New Zealand’s Economy Growth Exceeds Expectations for the Second Quarter

The country’s economy has grown faster than what is expected for the second quarter despite gloomy forecasts. Despite a fall in business confidence, the strong pull of the agricultural and service sectors countered this.

A 1% rise in Gross Domestic Product was seen in the last three months ending June, the strongest it’s ever been in the last two years. This rise can be largely attributed to the service industry, followed by the goods-producing industries.

The agriculture sector in the country has consistently led to economic growth contribution with an accounted rise of 4.1% with dairy products production, forestry exportation, and cattle raising. The same upward trend was seen for real estate, telecommunications, and tourism.

Only business investments were seen to have a slight fall, but not enough to cause worry. Business confidence dropped by a 10-year low, while consumer sentiment during the third quarter saw the lowest in the last six years.

However, data show that business investment performance was still above outlooks. This has prompted the Reserve Bank to hold on to current interest rates for the near future. However, it is also keeping a close watch on further developments and whether the current quarter will still see the same performance.

With this good economic performance, the NZ Dollar also fared well against the US Dollar, increasing by as much as quarter of a cent against its counterpart.

Increasing Fuel Prices Starting to Hurt New Zealanders

As the NZ dollar weakens and taxes increase, New Zealanders are beginning to feel the effects of inflated fuel prices. Despite this, Prime Minister Jacinda Ardern reiterated that it would not slow down and eliminate petrol taxes.

The transport sector has warned the government of the effects inflated fuel prices may have on the public. As of this writing, it’s been reported that families are beginning to make some drastic lifestyle changes, even cutting down on some commodities to make up for the increased fuel price.

Solo parent Lisa Cropp said that their family would have to sacrifice fun activities in order to cover up for the gas expense. And she’s been serving canned foods to her family instead of the usual cooking.

And Cropp is not an isolated case. A lot of New Zealanders have expressed the same sentiments, giving up town visits, spending less on groceries, among others.

However, this increase in gas cost will continue to create a snowball effect as trucking companies will also be severely affected, managing trucking costs. In turn, this will create an increase in the rise of almost all retail goods.

Even midwives are forced to turn down pregnant women from far-flung areas because getting to their areas has become too expensive for them.

While these have been the sentiments of New Zealanders, major oil players in the country deny that they have been overcharging on oil prices. In fact, these companies have cited that all these is due to the weakened NZ dollar and the rising cost of the product in the global market.

What is the Main Economy of New Zealand

For much of the country’s economic history, agriculture has been the driving force with which it has thrived. This was due to the country’s distant geographic location and other factors. However, with the remarkable transformations that happened during the last three decades, New Zealand has become one of the most competitive free-market based economies in the world.

Notwithstanding its distant location, New Zealand gradually developed sophisticated farming methodologies and practiced state-of-the-art agricultural technologies. These, coupled with the country’s innate fertile soil and sustainable weather conditions helped New Zealand’s agricultural and horticulture industries thrive.

The largest contributor to the country’s GDP is the service sector. While the country also relies heavily on international trade, establishing partnerships with the European Union, the US, Australia, and Asian countries like China, Japan, South Korea, Malaysia, and Thailand. Tourism has significant contributions to the economy as well being the top foreign exchange earner for the country.

Main Exports

As part of New Zealand’s export-driven economy, it is ranked as the world’s fifth highest exporter of dairy. Aside from this good, New Zealand also exports a diverse range of goods and commodities. These include meat, wool, wine, crops, timber, and more.

Agriculture

With land machinery replaced with highly mechanized equipment and custom-built aircraft, the country’s agricultural economy is booming. Aside from dairy, New Zealand is one of the leading exporters of lamb, mutton, and beef. Stable weather conditions and rich soil have proven advantageous for the country especially when it comes to growing crops such as barley, oats, wheat, and even citrusy fruits like kiwi fruit and passion fruit.

Tourism

Because of New Zealand’s beautiful weather and picturesque landscapes abundant in natural resources, tourism and film production have also exponentially increased as major players in the country’s economic growth.

The New Zealand Tourism Board has efficiently worked on promoting the country overseas while making sure that the country’s natural beauty and cultural significance are maintained. To date, most foreign visitors that frequent New Zealand are from Australia, the US, Europe, and Japan.

 

Although the New Zealand economy suffered some setbacks brought by the recession, it has slowly and steadily recovered over the past several years. Today, export growth might be expected to slow down, but the tourism industry is expected to boom with the influx of more tourists. Further, the exportation of dairy products will continue to gain momentum and keep the country’s economic robust!