New Zealand economics comment: More than just milk

Monday, 11 August 2014, 1:30 pm
Press Release: HSBC Bank

At Eden Park Bed and Breakfast I follow economic news with great interest . This report from the HSBC bank gives great “Feel Good ” factor about New Zealand…….

Falling dairy prices have created some doubts about the robustness of New Zealand’s economic boom. But it is worth keeping in mind that dairy is only one part of the economy’s recent growth story. Growth has also been driven by the post-earthquake rebuilding of the Canterbury region, an upswing in housing construction in Auckland and strong net inward-migration. While we expect the recent fall in dairy prices could weaken local income growth, we still expect GDP growth to be above trend in 2014 and 2015. There are also good reasons to believe that the recent slump in dairy prices could prove to be temporary.

Dairy prices have fallen sharply in recent months, with the GlobalDairyTrade price index down by -40% from its recent peak in February. New Zealand’s major dairy cooperative has revised down its forecast farm gate milk price for next season to NZD 6.00 per kilogram of milk solids (kgMS), which would be a noticeable hit to farm incomes compared to the 2013/14 season’s NZD 8.40 kgMS payout, if the fall proves to be permanent. If these price levels persist, they could knock as much as 2% of GDP off income growth, although there are a number of mitigating factors.

A key offset will be a likely ramp up in export volumes. To the extent that volumes ramp up without putting significant further downward pressure on prices, this will reduce the negative impact of the recent price fall on incomes. In our view, it is also likely that the dairy price story improves in coming quarters. The fall in dairy prices appears to largely reflect that China ramped up its milk powder inventories substantially in H2 2013 and is now running them down. We expect medium-term demand for dairy products to be well supported, as Asia’s middle class incomes rise, although, as with most agricultural commodities, weather-related supply factors and inventory cycles can drive significant volatility around this general trend.

Importantly, New Zealand’s recent growth story is more broad-based than just dairy. While the dairy sector is large, it is not dominant: in 2013/14’s stellar production season, dairy exports were worth NZD 15bn, equivalent to around 7% of GDP. Adding in dairy industry support services could boost the share of the economy reliant on the industry to around 10-15% of GDP. Even within the agricultural sector, dairy is not the full story. Meat prices are strengthening and meat exports to China are rising rapidly.

In terms of employment, agriculture is a relatively small sector. In total, 139,000 workers – 6% of the total – are classified as working in agriculture. New Zealand’s economy added +82,500 jobs over the year to Q2, but employment in the agriculture sector actually fell by 8,500 during that time. By contrast, the construction sector added nearly +30,000 jobs.

Construction has been a key driver of recent growth. The post-earthquake Canterbury rebuild, worth NZD 40bn (20% of GDP), is still in its early stages, with over a decade of reconstruction still ahead and the peak contribution to GDP growth not expected until at least 2015. Since the 2011 earthquake, total building activity in the region has measured around NZD 7bn, leaving over NZD 30bn yet to happen. Construction in Auckland is also rising, and should continue to do so, driven by strong population growth and weak housing supply. Central and local governments have recently put in place plans to speed up the growth in Auckland’s housing stock. Meanwhile, a renewed focus on upgrading buildings to higher earthquake standards should also boost construction activity, particularly in the earthquake-prone capital, Wellington.

Despite the fall in dairy prices, sentiment also remains high across consumers and businesses. Business confidence remains at levels implying GDP growth of 3-4%, with business investment and hiring intentions particularly positive. Consumer sentiment is holding up very well, with the quarterly survey remaining near a nine-year high in Q2.

Adding to New Zealand’s growth story, net migration flows have seen a remarkable turnaround over the past couple of years. Annual net migration is currently close to +40,000 (0.9% of the population), which is a huge turnaround from late 2012, when there was net outward migration of around -4,000 people. The turnaround has more than doubled New Zealand’s population growth. The major driver has been trans- Tasman migration, with fewer Kiwis leaving for Australia and a large increase in the number returning home from Australia (the highest rate in over two decades). New Zealand is also attracting more migrants from elsewhere, in particular from China, India and mainland Europe. All of those migrants will need somewhere to live and are expected to add to domestic demand.

Not only is New Zealand proving an attractive place to live, it is also attracting more tourists. Over the year to June, total visitor arrivals were up by +6% from the previous year. Encouragingly, the largest tourism market, Australia, continues to show steady growth despite the lower AUD/NZD. Visitor numbers from China have been the major source of growth over recent years, rising by +30% since June 2012. Tourism and supporting services are estimated to make up around 9% of GDP.

At Eden Park Bed and Breakfast our infrastructure is based around the accommodation sector. I do like the sound of these figures released in this report.

It is the view that New Zealand’s growth will continue to be above trend, largely driven by construction and surging inward-migration, which are expected to support domestic demand. At this stage we expect the recent fall in dairy prices will prove to be a temporary supply-side and inventory effect, rather than a permanent decline, although clearly this bears watching carefully.

With growth accelerating over the past year, the RBNZ has lifted its cash rate by 100bps since March. With a pause in the hiking cycle now being signalled, the question is how much more the RBNZ will need to do and when? Despite the fall in dairy prices, we still expect growth to be above trend in 2014 and 2015. Thanks to the strong growth outlook, we expect inflation to rise gradually over the next 12 months. We expect that the RBNZ will need to raise rates further yet, as the cash rate (currently at 3.50%) is still well below its neutral level. At this stage, we still expect another 25bp hike before the end of the year.

  1. Pingback

  2. Hmm it looks like your blog ate my first comment
    (it was extremely long) so I guess I’ll just sum it up what
    I wrote and say, I’m thoroughly enjoying your blog.
    I too am an aspiring blog blogger but I’m still new to everything.
    Do you have any suggestions for novice blog writers? I’d genuinely appreciate it.

  3. Pingback

  4. Pingback

  5. Thanks for ones marvelous posting! I certainly enjoyed reading it, you happen to be a great
    author.I will make certain to bookmark your blog and will eventually come back sometime soon. I want to
    encourage you to definitely continue your great job, have a nice

  6. Pingback

  7. Only an auto insurance professional can Concern and warning
    your non owner auto insurance policies qualification for your benefit.
    You may save money by purchasing your child a separate policy; the type of cars that
    you have factor into the price. Some important things to remember about this policy is that it only covers the costs of an accident for
    the other party if you are the cause of the accident.

    Here is my blog; E & Y Rental Property Insurance Rochester

  8. Pingback

  9. Pingback

  10. You actually make it appear really easy along with your presentation however I to find this topic to
    be really one thing that I feel I would never understand.
    It kind of feels too complicated and extremely vast for me.

    I am taking a look ahead for your next submit, I will attempt to get the hang of it!

  11. I’ll walk you through my recommended process of choosing the best roofing
    contractor for your home. Sharp is one of the larger manufacturers, but others
    include Ok – Solar, Uni-Solar, Open Energy, and Premier Power.
    Rubber and Plastic tiles are relatively newer in the market and still
    gaining market share.

    Also visit my homepage :: Roof contractor Troy

  12. Pingback

  13. Pingback

  14. Pingback

  15. Pingback

  16. Pingback

  17. Pingback

  18. Hmm it appears like your site ate my first comment (it was super long) so I guess I’ll just sum it up what I
    wrote and say, I’m thoroughly enjoying your blog.
    I as well am an aspiring blog writer but I’m still
    new to the whole thing. Do you have any helpful
    hints for inexperienced blog writers? I’d genuinely appreciate it.

  19. Pingback

  20. Waiting On Funds Lawsuit Cash Advance By providing
    out untrue information, or perhaps not such as right information and
    facts, maybe you’ve a prolonged hold out prior to your loan super real the treasury unveiled ppip this
    past year with the goal of enticing private equity firms who were sitting
    for the sidelines awaiting rules on when and how they could participate.

  21. Pingback

  22. Pingback

  23. Pingback

  24. Write more, thats all I have to say. Literally, it seems as though you relied on the video to
    make your point. You definitely know what youre talking
    about, why waste your intelligence on just posting videos to your site when you could be giving us something informative to read?

  25. Pingback

  26. Pingback

  27. of course like your web site however you have to check the spelling on several of your posts.
    Many of them are rife with spelling problems and I in finding it very bothersome to tell the truth then again I will surely come back again.

  28. I usually do not leave a great deal of comments, but i did some searching
    and wound up here New Zealand economics comment: More than just milk -.
    And I do have some questions for you if you tend not to
    mind. Could it be only me or does it appear like
    a few of the remarks appear as if they are left by brain dead people?
    :-P And, if you are writing at other social
    sites, I would like to keep up with anything fresh you have
    to post. Would you make a list of the complete urls of all your community pages
    like your Facebook page, twitter feed, or linkedin profile?

    Here is my webpage compare activity trackers 2014

  29. Pingback

  30. Pingback

  31. In addition to the gallery space SECCA has a large auditorium for music concerts, movies, and family fun activity
    days. Printed collateral material can still afford great benefits but is allocated a
    smaller share with the marketing budget than it did
    A decade ago. If you are a graphic designer or even a casual user who needs to do a lot of image editing work on his PC, you will
    need a fast, capable computer with the right components.

    my blog post – logo design Detroit Area (Karine)

  32. Even if your basement has a waterproofing membrane on all of the outside walls, a significant enough
    crack can tear or even shred the membrane and then you’re in trouble all over again.
    All of these things adversely effect your basement and foundation. You might be feeling the need of looking out for the
    options of how to repair basement foundation wall crack for your residential or the
    commercial property.

    Feel free to visit my webpage: foundation repair Wayne County – Edith,

  33. Pingback

  34. Pingback

  35. Pingback

  36. Pingback

  37. Pingback

  38. An article around the size of this one calls for about twenty minutes
    to write, and a few minutes to post. To avoid negative reviews,
    it’s best not to send out a mass request to clients.

    You’ll find article directory websites which might be explicitly designed for local small business proprietors to speak about their offerings and

    Also visit my web page yahoo google local business reviews
    ratings (Ollie)

  39. If you are in a budget and don’t want to spend much on a pre-estimate,
    this option can be for free or if not, at least it’s for a minimal cost.
    Best not to bring in the damaged car yet, so you
    won’t feel pressured into a repair you don’t feel strongly
    about. This will be the best way to ensure that the
    company will have the right products for your vehicle

    My web-site … car bumping Rochester (Rhonda)

  40. This is more fun for them than if you had mixed the sauce into it yourself,
    and that means they are more likely to eat it. Instead of playing outside, they
    are shut away in their rooms playing video games and watching television. You
    can obtain quick results if your weight loss plan includes short-term

    Feel free to surf to my web blog … easy healthy meals to make in bulk – Stephany,

  41. Thomas is able to offer advice and insight on a multitude of topics, including those pertaining to travel.
    The growing collection of artifacts and historical memorabilia prompted
    the move to a larger space. -Mirim, the end of the track, where I picked
    up the spike, walking beside the rusted rails, treading between splintered

    Also visit my weblog: santa fe railroad memorabilia;

  42. Firestone Building Products Company, LLC, acknowledges
    local Commerce City firm Douglass Colony Group with the esteemed 2011 Firestone Master Contractor Award.

    Chances are the work that they do will pay off in the long run. Most
    roofers are very fair with regards to the quotes they
    give and will set everything out in a legible and understandable manner.

    Also visit my site; Roofers Oakland County

  43. Pingback

  44. Offers, Make Money With Surveys, Win Free Money, The Easy Way
    To Earn Money Make money online, Earn money by complet offer, survey, offers, multi media, ads, get paid
    , make money at home, Paid Offers.
    How to get money fast, Get Paid To Complete
    Every time you will got money for complete an offers. This money you can earn per every offer.

    So, you can start earning by this way because this is very easy and common job in online.

  45. This article has been flagged as spam, if you think this is
    an error please contact us. Usually, these proclamations are backed up with a
    hearty helping of user statistics and impressive engagement and conversion rates.

    In this post I’m going to show you a Six Figure Formula To Online Marketing Success.

    my web page: internet marketing detroit seo and web designseo and web page development Troy mi

  46. Pretty great post. I just stumbled upon your blog and wanted to mention that I’ve really enjoyed surfing around your weblog posts.
    After all I’ll be subscribing to your rss feed and
    I hope you write again soon!

  47. Hello there! I know this is kinda off topic however I’d figured I’d ask.
    Would you be interested in exchanging links or maybe guest authoring a blog article or
    vice-versa? My website covers a lot of the same topics as yours and I
    believe we could greatly benefit from each other. If you might
    be interested feel free to shoot me an e-mail. I look forward to hearing from you!

    Fantastic blog by the way!

  48. I think this is one of the most important info for me.
    And i am glad reading your article. But should
    remark on some general things, The site style is perfect, the articles is really nice :
    D. Good job, cheers

    Look at my web site … garcinia cambogia extract 78 (

  49. Pingback

  50. Pingback

  51. The most important and practical plus point is time saving.
    It is popular worldwide due to its attractive nature. No one need know you only
    spent a small amount on your new Dining furniture.

  52. hello there and thank you for your information – I’ve definitely picked
    up anything new from right here. I did however
    expertise some technical points using this site, as I experienced to reload the site a lot of times previous to I could get it to load correctly.
    I had been wondering if your web hosting is OK? Not that I am complaining, but slow loading instances times will very frequently affect your placement in google and
    could damage your quality score if advertising and marketing with Adwords.
    Well I’m adding this RSS to my email and can look out for much more of your respective
    exciting content. Ensure that you update this again soon.

    My favorite webpage about modern technology: college hoops 2k8 2013 rosters

  53. Always keep two things in your mind prior to you pick your health paper topics
    which consist of your interest in the topic and
    the scope. These chili powders and other spices are used in excess and this is the reason diseases like cancer, bone problems and
    other similar diseases are very rare in this region.
    Learn to relax, chill and be happy with a book with
    no self image bothering you.

  54. Please let me know if you’re looking for a article author for your site.
    You have some really great posts and I think I would be a
    good asset. If you ever want to take some of
    the load off, I’d really like to write some content for your blog in exchange for a link back to mine.
    Please shoot me an e-mail if interested. Many thanks!

  55. Awesome blog! Do you have any recommendations for aspiring writers?

    I’m hoping to start my own blog soon but I’m a little lost on everything.
    Would you recommend starting with a free platform like WordPress or go for a paid option?
    There are so many options out there that I’m totally overwhelmed ..
    Any ideas? Thanks a lot!

  56. Alas, you can’t get a serious great experience for the support
    for the reason that absolutely free members have very constrained access to
    the lookup features. Netflix offers so much more than a regular television channel, letting you access
    content when and where you choose, on a range of different devices, such
    as gaming consoles, i – Pods, i – Pads and Android phones.

  57. Plus instantly watch exclusive content from the new movie The Croods from Dream – Works and get
    a movie ticket (up to $8 value) to see it in theaters starting March 22,
    2013. A user can simply copy and paste a promo code into a form field while
    they checkout of their favorite online store. It’s a far
    better investment on the 5 year period if you provide your house with
    all the necessities, instead of heading out to bars and wasting cash on things you don’t need.

  58. louis vuitton sac femme sac a main louis vuitton damier JwGVf
    Nel erste Erz Martino alla del 9 Grunge divisyone aryete l spostare Sue
    Tivoli Del proprye Fehler [in kvella Zona transitava er in fuga con il Sua tristissimo segoyto] erfüllen. sac
    neverfull louis vuitton prix sac a bandouliere louis vuitton homme rRPPz Louis,
    die Haupt msvkongratulatyons Psychologie Ashley Hügel, dessen Zeitung erhielt den ersten Platz in der Frauen und SWOT-Stipendien Ashley Minderheiten präsentieren seinem Vortrag
    auf der Jahrestagung der Vereinigung Südost psitshologikal März 2014.!
    Darüber hinaus wurde der Artikel zur Veröffentlichung eingereicht
    Ashley! Katie Teixeira, ein Nebenfach Psychologie / Biomedizinische Analytik Major, erhielt einen National Science Foundation finanziert Stipendium für Auburn Programm in der
    Zell-und Molekularbiologie (KMB), um zu untersuchen, in einem Mausmodell, wie Teenager Exposition Kokain und impulsiviti perseveratyon Ergebnisse bei Erwachsenen. petit sac a dos louis vuitton sac louis vuitton damier gris JYvQN Cameron startet eine
    Linie zu Eric, auf der Suche nach einer Antwort. sacoche louis vuitton damier
    noir ceinture louis vuitton toute noire TVGqw Eine Steuer auf der Verwendung von Mess Straße bewahrt Fairness und Verantwortung bei der Unterstützung
    der System von Straßen und Autobahnen des Staates.

    basket louis vuitton damier homme louis vuitton pas cher a paris hpUUj Die Abstands Organisator der Veranstaltung marnye Er war ein Kraft der Menschen nicht oft kann man die
    Präsidenten und Chief Executive Officer von zahlreichen Organisationen, unglaublich guten Kern von Menschen zu

  59. The subject of coconut oil is an interesting topic in both the culinary and the nutrition world.
    I recently took a poll from my readers and found the mopst frequent residence remedies of
    acne sufferers. Women with a history of miscarriage shouldn’t use Peppermint Oil in any form at all while pregnant
    or trying to get pregnant.

  60. Hellas Jet and Air Miles are forming a future partnership for travel.
    decades prematurely as a result of information about it was
    gathered by way of DARPA’s secret time travel program unlocks
    several of the more enigmatic info in the My intentions for U.S.
    government secret teleportation and time travel are easy. Some news outlets have incorrectly reported
    that the US State Department is warning against all travel to Jalisco.

  61. I just like the valuable info you provide to your articles.
    I will bookmark your blog and take a look at again here regularly.

    I’m moderately sure I’ll learn plenty of new stuff proper right here!
    Best of luck for the next!

  62. Howdy! This article couldn’t be written any better!
    Reading through this post reminds me of my previous roommate!
    He always kept talking about this. I will send this article to him.
    Pretty sure he’s going to have a very good read.
    I appreciate you for sharing!

  63. Hello just wanted to give you a quick heads up. The text iin your post seem to be running off the screen in Chrome.
    I’m not sure if this is club penguin make a new account (Gay) format issue or somethng to do
    with browser compatibility but I figured I’d post to let you know.
    The layput look great though! Hope you get thee issue resolved soon. Kudos

  64. I was wondering if you ever thought of changing the layout of your blog?
    Its very well written; I love what youve got to say.
    But maybe you could a little more in the way of content
    so people could connect with it better. Youve got
    an awful lot of text for only having 1 or two images.
    Maybe you could space it out better?

    Here is my web-site; nasdaq penny stocks

  65. Pingback

Leave a Reply

Your email address will not be published. Required fields are marked *

1 × two =

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Auckland's top Restaurants offer Terrific food, served with great charm and efficiency in a smart but probably somewhat informal atmosphere.

Brief overview of upcoming events in Auckland City

A short walk from Eden Park makes us the perfect destination for all their sporting fixtures.