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.

Tourism Growth for New Zealand

At Eden Park Bed and Breakfast we are involved in the accommodation industry in Auckland. Latest Tourism reports show total visitor spending in New Zealand grew by 11 per cent to $7.1 billion in the past year, driven by strong growth from the United States, Germany and China.

Financial figures for the year ending in June showed visitors increased their spending by $800 million.These figures are based on results from approximately 8900 visitors departing New Zealand airports.

The results showed there was a significant increase in total spending by visitors from the United States, up an estimated 53 per cent from the previous year to $773m, and Germany, up 63 per cent to $375m. Spending by visitors from China rose 26 per cent to $912m, as visitors moved from lower value short shopping trips to longer stays.

But how to tap the Chinese Market is still a challenge. At Eden Park Bed and Breakfast , we accommodate a percentage from that FIT market , but tapping into the Chinese Tour Market is still difficult ….or impossible !

Spending by Australians fell 4 per cent to $2.11b.
And business spending tumbled by 22 per cent from $585m to $459m.

Tourism is still strong tho. Although we found it to be quiet for accommodation in the month of July , August shows improvement . Next week we have the All Blacks playing Australia at Eden Park. Full House at Eden Park Bed and Breakfast.
Go Black !

New Zealand challenges for 35th America's Cup

As a Kiwi sailor and being part of Eden Park Bed and Breakfast in Auckland, I am a TRUE BLACK supporter of the announcement that Team New Zealand , backed by the Royal New Zealand Yacht Squadron , New Zealand challenges for 35th America’s Cup.

The Kiwi syndicate, became the first team to officially announce their challenge .

Scuttlebutt in the yachting circles says that Italian team Luna Rossa and Artemis submitted their entries before Emirates Team New Zealand, but have yet to officially announce their challenge. Others who have signaled they’ll be throwing their hat in the ring are Ben Ainslie Racing (GBR) and a French challenge led by Franck Cammas, bringing the suggested total of challengers for the 2017 event to five . But scuttlebutt also says that this is all supposition because some believe that the funding for these challengers it’s not guaranteed.

After the withdrawal of the Challenger of Record ( Australia) last month, Oracle have been desperately trying to salvage the public relations fiasco surrounding the race. It is expected that the role of (COR ) will go to the first challenger to submit their entry, rumored to be Luna Rossa.

Supposedly we are also led to believe that the Italian team led the way in rallying their fellow intended challengers to issue a joint accord statement to reiterate their support for the event following Team Australia’s withdrawal . (I note Team New Zealand’s non participation in this accord.)

After last years racing and our demoralizing defeat to the enemy( Oracle ) , I am still a firm believer that we have the technological  skill and the sailors to take this piece of silver from the Americans .

Go Kiwis!

Safer driving for Tourists in New Zealand

At Eden Park Bed and Breakfast we see numerous travellers arriving after picking up a car at the airport and driving into Auckland. We had one guest that had 3 incidents on the 18 km journey. So the issue of Safer driving for Tourists in New Zealand is something serious we should be aware of and get people informed.

The Police in Queenstown ,New Zealand have taken a bold step towards getting tourists driving in a safe manner. They are now working with rental car companies to take incompetent tourist drivers off the road.

When they come across a tourist driver they think is incompetent, they are phoning rental car companies and asking them to cancel a client’s contract.

It seems that they have legal issues if they use the Land Transport Act to prevent incompetent overseas visitors from driving. The only way for police to remove someone from the road is to arrest them for a driving offense or imposing bail conditions.

So to get around this they are working with rental companies to remove drivers they believe pose a threat to other road users

It was up to the rental company to cancel the contract.

It’s may seem not a lot ,but anything to have tourists practicing safe driving in New Zealand is always welcome.

The Volcano of Mount Eden Auckland , New Zealand

#MountEden – (Maungawhau- hill of the whau tree)
Starting 250,000 years ago, small basaltic volcanoes erupted across the Auckland Isthmus, creating the Volcano of Mount Eden Auckland, in New Zealand.

Some were violent eruptions where magma encountered water,but in the case of Mt Eden the magma rose without meeting water and produced a steep sided cone from localised scoria and ash, and fields from the quiet outpouring of lava flows.
The crater is circular, about 180m in diameter and 50m deep.

The southern side of the crater rim is the highest point on the scoria cone(196m above sea level), and is the highest point on the Auckland Isthmus.
The Isthmus of Auckland is one of the most remarkable volcanic districts on the earth.The volcanoes are unique in their number(50) , and the peculiar shape of their cones and craters.
Most of the volcanoes in Auckland are thought to have grown by eruptions lasting a few months or possibly a few years.
Maungawhau is named after the Whau tree, one of the world’s lightest woods it was used for fishing floats and utility rafts. New cultivation techniques brought from the Pacific saw massive production of Taro and Kumara. Huge gardens spread from the base of

Maungawhau through the modern day Mt Eden suburb with volcanic rocks used as passive solar heating for seed raising beds to help tropical crops adapt to the colder environment.
Te Tuahu o Hua Kai Waka on the slopes of Maungawhau is the ancient shrine where ceremonies were performed for significant events and battles. Maungawhau is also the repository of koiwi (human remains) with burials across the mountain and the Mt Eden suburb.

Tangata Whenua continue to observe customary practices on Maungawhau. Matariki or the Maori New Year is one such practice observed before dawn in June each year.

The road to the summit of Maungawhau is named for Puhihuia, a highborn daughter of Te Waiohua. Ponga of Ngati Kahukoka from Awhitu was visiting Maungawhau and although he was of lower social status they eloped to the anger of Puhihuia’s disapproving parents. They escaped across the Manukau Harbour to Awhitu followed by an avenging taua.

War between the Iwi was avoided when Puhihuia faced a series of duels. She defeated her opponents and the taua returned accepting Puhihuia’s choice of a husband.
The early Maori Tribes took advantage of the Volcanic cone to gain an advantage over their enemies by having advanced fortifications established . This Pa was an established village with sleeping huts and food storage.
Today the Volcanic cone is a major Tourist sightseeing destination.

For a guest to walk from Eden Park Bed and Breakfast is a 40 min walk. To catch a sunrise from this Volcanic point is a “MUST DO ” in Auckland City.

There are various organizations dedicated to the preservation of the Historical nature of this unique place.
The friends of Maungawhau are a non profit organisation that welcome any assistance that guests may have to offer. www.maungawhau.co.nz

 

New Police technology

Be aware travelers. New Zealand Police are expanding their use of Automatic Number Plate Technology .  This is the new police technology in New Zealand.

At Eden Park Bed and Breakfast we do advise all travelers to get the rental car the day after arrival. You get the chance to rest before taking on Auckland traffic and exploring New Zealand.   After a sleep at your accommodation and then getting a car ,is a better practice than from an airplane to driving a car.

This new Police technology tool uses cameras mounted on the roof of the patrol car car that scans the number plates of passing vehicles and feeds the information to a computer inside.

It checks the details against information held by police about vehicles of interest and if found, alerts the offer for follow up.

New Tourism Venture For Auckland

Great news in Auckland as the announcement that the ship Ipipiri, which has 30 cabins will be permanently based in the Viaduct Harbor. A new tourism venture for Auckland.

The catamaran Ipipiri is New Zealand’s largest permanently-based cruise ship and the Auckland-based cruise business was launched today.

It will be able to cater cocktail events for up to 100 people and has restaurant seating for up to 80.

The vessel has offers 30 ocean view cabins, complete with en suites and will offer day and overnight cruises in the vicinity of Waiheke Island .

IPIPRI
• Length: 44.5m
• Width: 13m
• Height: 11m
• Hull depth: 1.4m
• Decks: 4
• Cabins: 30 ocean view rooms with en suites

I personally think this is brilliant for the Tourism Industry.

At Eden Park Bed and Breakfast we are involved in the accommodation sector. We promote activities and tours to guests traveling within Auckland and New Zealand.

To be able to offer another activity that keeps travelers within Auckland offers spin offs to other tourism operators . We may even have to go out for a trip ourselves when the time allows ……

Tourism Gains in New Zealand

In the Bed and Breakfast industry in New Zealand there is widespread belief that the future bodes well due to Tourism New Zealand reporting significant gains in visitor numbers over the past year – with an estimated 150,000 extra people gracing our shores. All these tourism gains in New Zealand need of the 4 vital components in Tourism;
1) accommodation
2) Food
3) leisure activities
4) transportation

The number of arrivals from Germany rose by 16.6%, while visitor numbers rose by 2.8% for the UK and 11.7% for the USA.

There was also strong growth in the Asian markets, with Singapore up 18.6% and Malaysia up 19.4%. An increase in the number of arrivals was also recorded in Indonesia, India and China.

The Australian market also continued to grow – up 4.4% for the year.

(if only Team New Zealand had bought the America’s Cup home ….)

Visitor Arrivals in New Zealand

International Visitor Arrivals to January 26th 2013
Total visitor arrivals are up 9% compared to the same four week period last year.

Up: China 39%, Singapore 39%, India 29%, Germany 23%, Australia 9%, UK 8%,Korea 7%

Down: USA -11%, Canada -9%

No change: Japan

Balloon Internet from Google

It seems NewZealand has an unusual Stratospheric wind pattern.
On Saturday Google Scientists from the technology giant released up to 30 helium-filled test balloons flying 20 kilometres (12.4 miles) above Christchurch in New Zealand Saturday, carrying antennae linked to ground base stations.
While still in the early stages, Project Loon hopes eventually to launch thousands of balloons to provide Internet to remote parts of the world, allowing the more than four billion people with no access to get online.
It could also be used to help after natural disasters, when existing communication infrastructure is affected.
“Project Loon is an experimental technology for balloon-powered Internet access,” the company said on its latest project from its clandestine Google (x), “where we work on radical, sci-fi-sounding technology solutions to solve really big world problems”.
“Balloons, carried by the wind at altitudes twice as high as commercial planes, can beam Internet access to the ground at speeds similar to today’s 3G networks or faster,” it added.
“It is very early days, but we think a ring of balloons, flying around the globe on the stratospheric winds, might be a way to provide affordable Internet access to rural, remote, and underserved areas down on earth below, or help after disasters, when existing communication infrastructure is affected.”
It works by ground stations connecting to the local Internet infrastructure and beaming signals to the balloons, which are self-powered by solar panels.
The balloons, which once in the stratosphere will be twice as high as commercial airliners and barely visible to the naked eye, are then able to communicate with each other, forming a mesh network in the sky.
Users below have an Internet antennae they attach the side of their house which can send and receive data signals from the balloons passing overhead.
Some 50 people were chosen to take part in the trial and were able to link to the Internet.
The first person to get Google Balloon Internet access was Charles Nimmo, a farmer and entrepreneur in the small town of Leeston who signed up for the experiment.
He told the New Zealand Herald he received Internet access for about 15 minutes before the transmitting balloon he was relying on floated out of range.
“It’s been weird,” he told the newspaper. “But it’s been exciting to be part of something new.”
Google’s ultimate goal is to have a ring of balloons — each the length of a small light aircraft when fully inflated — circling the Earth, ensuring there is no part of the globe that cannot access the web.
It did not say how much it was investing in the project.
“The idea may sound a bit crazy – and that’s part of the reason we’re calling it Project Loon – but there’s solid science behind it,” Google said, but added: “This is still highly experimental technology and we have a long way to go.”
Project leader Mike Cassidy told reporters that if successful, the technology might allow countries to leapfrog the expense of installing fibre-optic cable.
“It’s a huge moonshot, a really big goal to go after,” he said.
“The power of the Internet is probably one of the most transformative technologies of our time.”
Google said that over time it wanted to set up other pilot projects in countries at the same latitude as New Zealand, including Australia and Argentina, due to the stratospheric conditions.

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.

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