New Zealand · 2007-08-27 · COUNTRY REPORT New Zealand 2nd quarter 1997 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom. The Economist Intelligence

COUNTRY REPORT

New Zealand

2nd quarter 1997

The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

The Economist Intelligence Unit

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Contents

3 Summary

4 Political structure

5 Economic structure

6 Outlook for 1997-98

10 Review10 The political scene14 Economic policy19 The economy21 Prices, wages and employment22 Money and finance23 Sectoral trends25 Foreign trade and payments26 Business news

29 Quarterly indicators and trade data

List of tables9 Forecast summary

10 Economic results and forecasts19 Real expenditure on gross domestic product20 Gross domestic product by sector21 Consumer prices, headline measure22 Interest and exchange rates25 Current account29 Quarterly indicators of economic activity30 Trade with main partners31 Direction of trade

List of figures9 Gross domestic product9 New Zealand dollar real exchange rate

21 Current-account deficit26 Public-sector foreign debt

New Zealand 1

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997

June 4, 1997 Summary

2nd quarter 1997

Outlook for 1997-98: The coalition’s current difficulties could result in theNational Party moving closer to ACT. Much will depend on the forthcoming1997/98 budget and superannuation referendum. GDP growth will pick up in1997 and 1998, on the back of faster export growth. Inflation will remain low.

The political scene: The government’s credibility has been undermined bythe activities of some New Zealand First MPs. National’s declining popularityhas brought into question the continued leadership of the party by the primeminister, Jim Bolger. Defence spending may be increased.

Economic policy: The 1997/98 budget is certain to push up governmentspending. NZ Post may lose its monopoly position, and further privatisationsare possible. A study has suggested that New Zealanders are over-taxed. Detailson the proposed superannuation scheme are still sparse.

The economy: Growth has slowed. Domestic demand fell in the fourthquarter, but exports growth has continued. Manufacturing growth has beenlargely dependent on increased processing of agricultural goods.

Prices, wages and employment: The headline rate of inflation has fallen to1.8%. Wages have grown more quickly in the public sector than in the private.Employment growth has stalled, and the unemployment rate has risen.

Money and finance: After confused signals from the Reserve Bank, the cur-rency’s trade-weighted index has fallen, along with interest rates. New Zealandhas the most EFT-POS terminals per head of population in the world.

Sectoral trends: A fire blight discovery has prompted a row with Australia.Beef produced with growth hormones will be denied a new quality mark.The future of the Glenbrook steel plant is uncertain. Telecom and ClearCommunications are back in court.

Foreign trade and payments: The current-account deficit contracted in thefourth quarter. The terms of trade have deteriorated. The level of foreign debthas risen.

Business news: Dairy Board officials have been arrested by the UK’s Customsand Excise. PepsiCo is using a large public share offering to separate its fast foodbusinesses from its food and beverage operations. Heinz Wattie has sold TipTop Ice Cream.

Editor:All queries:

Graham Richardson Tel: (44.171) 830 1007 Fax: (44.171) 830 1023

New Zealand 3


Political structure

Official name New Zealand

Form of state Parliamentary monarchy

National legislature Unicameral House of Representatives of around 120 members elected using the mixedmember proportional (MMP) electoral system for a three-year term

Electoral system Universal direct suffrage over age 18

National election October 12, 1996; next election due by October 1999

Head of state Queen Elizabeth II, represented in New Zealand by the governor-general, Sir MichaelHardie Boys

National government Cabinet headed by prime minister, appointed by the governor-general on the basis ofparty strength in the House of Representatives. There is currently a NationalParty-New Zealand First coalition government

Main political parties National Party (44 seats); Labour Party (37 seats); New Zealand First (17 seats); Alliance(13 seats); ACT New Zealand (eight seats); United New Zealand Party (one seat)

Prime minister & minister in charge of the Security Intelligence Services Jim BolgerDeputy prime minister & treasurer Winston Petersa

Key ministers Agriculture, forestry & international trade Lockwood SmithAssociate treasurer, valuation department & public trust office John Delamerea

Attorney-general, corrections, defence & audit department Paul EastCommerce, industry, fisheries & lands & associate minister of agriculture John LuxtonCommunications, research, science & technology, & statistics Maurice WilliamsonEducation & leader of the house Wyatt CreechEmployment Peter McCardlea

Environment, research, science & associate minister of foreign affairs & trade Simon UptonFinance & revenue Bill BirchForeign affairs & trade, Pacific Island affairs, disarmament & arms control Don McKinnonHealth Bill EnglishHousing, sport, fitness, leisure & tourism Murray McCullyJustice, courts & Treaty of Waitangi negotiations Douglas GrahamLabour, immigration, energy & business development Max BradfordMaori affairs, racing & associate minister for sport, fitness & leisure Tau Henarea

Police, internal affairs & civil defence Jack Eldera

Social welfare Roger SowryState services, state-owned enterprises, transport, Accident Rehabilitation and Compensation Insurance & Radio New Zealand Jenny Shipley

Reserve Bank governor Don Brash

a New Zealand First.

4 New Zealand


Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995 1996

GDP at market prices NZ$ bn 73.3 79.0 84.5 89.0 92.6

Real GDP growth % 2.2 5.9 5.4 2.8 1.9

Consumer price inflation % 1.0 1.3 1.7 3.7 2.3

Population (av) m 3.44 3.48 3.53 3.58 3.62

Exports fob US$ bn 9.74 10.47 11.99 13.74 14.44

Imports fob US$ bn 8.11 8.75 10.65 12.59 13.65

Current accountb US$ bn –1.4 –1.1 –2.4 –3.8 –2.9a

Reserves excl gold US$ bn 3.06 3.38 3.71 4.41 5.96

External debt US$ bn 35.3 38.0 44.1 48.4 56.4

Exchange rate (av) NZ$:US$ 1.86 1.85 1.68 1.52 1.45

June 3, 1997 NZ$1.45:US$1

% of % ofOrigins of gross domestic product 1996 total Components of gross domestic product 1996 total

Agriculture, fishing, forestry & mining 8.0 Private consumption 64.2

Manufacturing 18.5 Government consumption 15.0

Utilities & mining 2.7 Gross fixed capital formation 21.6

Construction 3.8 Increase in stocks 0.6

Trade 14.7 Exports of goods & services 32.8

Transport & communications 10.9 Imports of goods & services –34.1

Finance & business etc 13.7 GDP at market prices (incl statistical discrepancy) 100.0

Owner-occupied dwellings 7.8

Public services 10.6

GDP incl others 100.0

Principal exports 1995 US$ m Principal imports 1995 US$ m

Dairy produce 1,791 Machinery & mechanical appliances 2,136

Forest products 1,676 Vehicles & aircraft 1,975

Meat 1,578 Electrical machinery 1,428

Fruit & vegetables 819 Mineral fuels etc 680

Wool 792

Fish 478

Main destinations of exports 1995 % of total Main origins of imports 1995 % of total

Australia 20.4 Australia 21.8

Japan 16.2 USA 18.6

USA 10.0 Japan 13.7

UK 6.1 UK 5.9

a EIU estimate. b IMF basis.

New Zealand 5


Outlook for 1997-98

Mr Bolger is in a difficultposition—

The prime minister and leader of the National Party, Jim Bolger, has foundhimself placed in a difficult position in recent months. He is leading a coalitiongovernment that is struggling to maintain its own credibility and internalcohesion. The coalition has been dogged by a number of incidents centring onthe behaviour and activities of members of its junior partner, New ZealandFirst. These include a late-night fracas outside parliament between the deputyprime minister and leader of New Zealand First, Winston Peters, and a NationalParty backbencher, along with new revelations of extravagant spending ofpublic funds by a New Zealand First MP, Tukoroirangi Morgan, while he was adirector of a Maori television channel (see The political scene).

—as New Zealand Firstfails to impress

The resulting media scrutiny has had several effects. First, New Zealand First’spopularity has slumped to a fraction of what it was at the time of the October1996 election, and National’s support is starting to be dragged down alongwith that of its junior partner. Second, the incidents have highlighted thefragility of the government’s one-seat majority in parliament. Third, as anincreasing number of National Party members link their own party’s flaggingfortunes to the actions of New Zealand First’s MPs, they are questioning thelong-term sensibility of maintaining a close association with New Zealand First.The coalition’s problems have also brought into question Mr Bolger’s futureleadership of National, although he is probably in a strong enough position tofight off any challenge for some time yet.

The 1997/98 budget mustrestore public confidence—

Both Mr Bolger and Mr Peters will be looking to the fiscal year 1997/98 budget,which will be unveiled on June 26, to reinstate public confidence in thecoal-ition government. The budget will be the first major test of the coalitionpartners’ ability to deliver on the initiatives outlined in their December 1996coalition agreement. The budget must combine fiscal prudence (manifest incontinued debt repayment) with increasing social expenditure in problematicsocial policy areas such as education and health. Mr Peters has surprised manyof his critics with how closely he has adopted an economically orthodoxapproach in his role as treasurer, and his March Budget Policy Statement (BPS)indicates that there are unlikely to be major surprises in the budget (seeEconomic policy).

While this should help placate concerned National supporters, there is a risk forMr Peters that the budget will fail to reinforce his own party’s identity and donothing to arrest its slipping support. Several of the key planks of New ZealandFirst’s election manifesto are unlikely to feature in the 1997 budget. Includedamong these are a programme to introduce work training schemes for long-termthe unemployed (which the employment minister believes is over a year awayfrom being ready for implementation), and the introduction of universal allow-ances for tertiary students. The education minister, Wyatt Creech, pointed outin late April that there would be no guarantees that this scheme would beintroduced by 1999. The scheme might cost over NZ$350m (US$240m), therebyproving too expensive to implement within the government’s self-imposed (and

6 New Zealand


sacrosanct) limit of NZ$5bn additional spending between 1997/98 and1999/2000.

—and the superannuationreferendum is the next

hurdle

Beyond the budget, the biggest single test to the credibility of Winston Petersand his New Zealand First party is posed by the referendum on compulsorysuperannuation planned for September. The superannuation savings schemewas a central New Zealand First policy during its election campaign and is beingpromoted almost single-handedly by Mr Peters (not with wholehearted supportfrom his own party). Opposition to the scheme from senior members of theNational Party has already been voiced, despite the fact that full details are notdue to be released until July. Opinion polls also suggest that only a minority ofthe population will be in favour of the scheme. The public and parliamentarydebate in the lead-up to the September referendum will intensify over the nextfew months and is likely to increase tension between the coalition partners.

A closer association ofNational and ACT is

possible—

If Mr Peters slips up in the budget or in the superannuation referendum, andpublic support for his party remains low, several things are possible. First,National’s courting of the radical right-of-centre ACT New Zealand party andthe sole United MP is likely to become more ardent, as National worries aboutthe fragility of its one seat majority in the House of Representatives. Second,National MPs are likely to question the justification of the current agreement toincrease New Zealand First’s allocation of cabinet positions from five to eight ina reshuffle planned for October 1998, if New Zealand First’s poll supportbecomes negligible. Unhappy National MPs may also begin to defect to otherparties.

—as is the emergence of aMaori-issues party—

A perception among New Zealand First supporters that Mr Peters is becomingincreasingly aligned with National party conservatism could also divide thejunior coalition partner. If Mr Peters is discredited, New Zealand First may aban-don its current quirky policy mix in favour of becoming a Maori-issues party(New Zealand First MPs hold all five of the Maori electorate seats). The deputyleader of New Zealand First, Tau Henare, added credence to this possibility inlate May when he said that he would consider leading a Maori party in the nextelection. Mr Henare’s comments (which Winston Peters termed “unhelpful”)suggest that he hopes Maori MPs could hold the balance of power betweenNational and Labour after the 1999 election.

—which could help Labour The opposition Labour party would gain if New Zealand First turns itself into aMaori-issues party. The party has recently issued a “Labour 2000” programme,which aims to improve its public profile and focuses on Maori and other targetgroups of rural and middle-income voters. Key themes of Labour’s programmeare to promote a message of security and stability, emphasising social policyareas such as education, health and social welfare. Labour’s biggest weakness inthe new mixed member proportional (MMP) political system is the absence ofsuitable coalition partners to help it contest the dominant power of a National-led government; it might be able to reach some sort of arrangement with aMaori-issues party. The Labour leader, Helen Clark, has dismissed shifting pol-icy to the left in order to accommodate a closer working relationship with theleftist Alliance party.

New Zealand 7


The economy ploughs onregardless—

Debate over New Zealand First’s failings has distracted attention from thecountry’s economic performance. Here, the news is rather better than might beexpected. Barring any budget surprises, New Zealand First has failed to imple-ment any of its more extravagant or nationalistic policies. The increase ingovernment spending may in fact be slightly less in 1997/98 than agreedbetween the coalition partners in December 1996 (see Economic policy). Thewidening of the Reserve Bank of New Zealand’s target for the underlying rate ofconsumer price inflation from 0-2% to 0-3% does not appear to have weakenedthe bank’s resolve, and no alternatives to the current high real interest ratestrategy (much attacked in the election campaign for rendering exports un-competitive through artificially inflating the value of the New Zealand dollar)has been proposed. The EIU’s economic forecasts are therefore based on theassumption of a continuation of current policy, despite small increases inpublic spending.

—and exports willcontinue to underpin

economic growth—

Recent economic statistics have also been reasonably encouraging. Domesticdemand has been depressed, but export growth appears to have continued,despite the strong dollar. (There is a not wholly convincing argument that, formany commodity exports, New Zealand is simply a “price taker” on the inter-national markets, and thus the value of the currency makes little difference.)Export growth is forecast to pick up further in 1997, helped by increasedvolumes of exports of many agricultural and processed agricultural goods (mostnotably from the dairy sector). More buoyant conditions in the Australian andJapanese economies—New Zealand’s two most important export markets—willensure a further acceleration in export growth in 1998. Along with a slightfirming in domestic demand, as government consumption and overall fixedinvestment growth picks up, GDP growth should reach 2.8% in 1997 and 3.8%in 1998.

—also providing somerelief for the current

account

Steady export growth should provide some relief for the current account, withthe merchandise trade surplus increasingly slightly. There is likely to be a smallservices deficit in 1997 and 1998, but the current account position will con-tinue to be dominated by a massive deficit on incomes payments, due largelyto the need to service New Zealand’s foreign debt. With commercial debt onthe increase (see Foreign trade and payments), these outflows are unlikely tofall much over the next two years, despite the government’s efforts to reduceits own debt liabilities. As the economy is forecast to pick up, remittances ofprofits from foreign companies operating in New Zealand are also likely toremain high, putting further pressure on the invisibles deficit. As a result thecurrent-account deficit (IMF basis) is likely to rise in absolute terms from anestimated US$2.9bn in 1996 to US$3.2bn in 1997 and US$3.3bn in 1998,although its share of GDP will remain broadly constant.

Consumer price inflationwill remain low—

Despite the increase in growth, consumer price inflation will remain low.Housing prices have eased, and wages growth is currently running at annualrates of only around 2%. With the New Zealand dollar forecast to remainreasonably strong (see below), no upsurge in import prices is likely. As a result,the average annual rate of headline consumer price inflation is likely to fall to1.7% in 1997 and 1.5% in 1998.

8 New Zealand


—but further sharp fallsin interest rates are

unlikely—

Despite lower inflation, the Reserve Bank is unlikely to encourage further sharpfalls in interest rates. The bank has a strong incentive to err on the side ofcaution: it is supposed to consider inflationary trends 18 months ahead, and inthe past over-hasty reductions in interest rates have boosted growth andpushed inflation outside the target band (now set at 0-3%). The inflationaryimplications of the personal tax cuts now scheduled for July 1998 may alsoneed to be countered. Further small reductions in rates are, however, possible.As recent events have demonstrated (see Money and finance) the bank mayhave to work out a better way of informing the financial markets of its wishes.

—and the currency willremain quite strong

The New Zealand dollar has slipped slightly against the US dollar in recentmonths, mainly due to the strength of the US currency. The New Zealanddollar has appreciated against most other currencies. The driving force behindthe strong New Zealand dollar remains high real local interest rates, makingforeign investors keen to take up local currency debt. With the current govern-ment most unlikely to change the current inflation control approach, whichuses high real interest rates as its principal weapon, foreign investors areunlikely to lose enthusiasm, and the exchange rate is likely to averageNZ$1.46:US$1 in 1997. As the US dollar weakens slightly in 1998, the exchangerate may firm slightly to NZ$1.45:US$1, but the New Zealand dollar will losesome ground against the Japanese yen and other regional currencies.

Forecast summary(% change year on year unless otherwise indicated)

1995a 1996a 1997b 1998b

Real GDP growth 2.8 1.9 2.8 3.8

Consumer price inflation 3.7 2.3 1.7 1.5

Current-account balance (US$ bn)c –3,778 –2,852d –3,154 –3,251

Average exchange rate (NZ$:US$) 1.52 1.45 1.46 1.45

a Actual. b EIU forecasts. c IMF basis. d EIU estimate.

0

1

2

3

4

5

6

1994 95 96 97(b) 98(b)

New Zealand

OECD average (a)

Gross domestic product % change, year on year

(a) Excl Iceland, Luxembourg, Mexico, New Zealand and Turkey.(b) EIU forecasts. (c) Nominal exchange rates adjusted for changesin relative consumer prices.Sources: EIU; IMF, International Financial Statistics.

70

80

90

100

110

1990 91 92 93 94 95 96 97(b) 98(b)

New Zealand dollar real exchangerate (c)1990=100

NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥NZ$:¥

NZ$:DMNZ$:DMNZ$:DM

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥NZ$:¥

NZ$:DMNZ$:DMNZ$:DM

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:US$

NZ$:¥

NZ$:DM

New Zealand 9


Economic results and forecasts(NZ$ bn at constant 1991/92 prices unless otherwise indicated; % change year on year in

brackets)

1995a 1996a 1997b 1998b

Private consumption 51.86 53.92 55.53 57.48 (4.3) (4.0) (3.0) (3.5)

Public consumption 12.56 12.62 12.87 13.20 (1.9) (0.5) (2.0) (2.5)

Gross fixed investment 17.26 18.11 19.01 20.15 (10.7) (4.9) (5.0) (6.0)

Final domestic demand 81.68 84.64 87.42 90.82 (5.2) (3.6) (3.3) (3.9)

Stockbuilding 1.02 0.46 0.71 0.72

Total domestic demand 82.70 85.10 88.12 91.54 (4.7) (2.9) (3.5) (3.9)

Foreign balance –0.30 –1.11 –1.75 –1.87

GDP 82.40 83.99 86.38 89.67 (2.8) (1.9) (2.8) (3.8)

Exports of goods & services 26.40 27.53 29.05 31.08 (2.8) (4.3) (5.5) (7.0)

Imports of goods & services 26.70 28.64 30.79 32.95 (8.9) (7.3) (7.5) (7.0)

a Actual. b EIU forecasts.

Review

The political scene

The coalition finds thegoing tough—

The National-New Zealand First coalition has struggled through its first sixmonths in government. The prime minister, Jim Bolger, admitted through aspokesperson in late April that he was concerned that incidents centring on theactivities of members of the junior coalition partner, New Zealand First, wouldaffect the “credibility” of the government. Mr Bolger’s feelings are shared bythe National Party president, Geoff Thompson, who acknowledged in mid-Maythat there was widespread concern within the National Party about theperformance of the coalition government. Mr Thompson also hinted thatNational could go into the 1999 election without a pre-arranged coalitionpartner. The National MP and Speaker of parliament, Doug Kidd, has predictedthat New Zealand First will be “dog tucker” in the 1999 election.

—as a New Zealand FirstMP is urged to resign—

Mr Bolger’s admission of concern came in the wake of further revelations of ex-travagant tax-payer-funded spending by a New Zealand First MP, TukoroirangiMorgan. Mr Morgan’s spending, which related to his role as a director of theMaori pilot television channel, Aotearoa Tekinsion Network (ATN), has longbeen the subject of investigation (1st quarter 1997, page 11). In the latest flare-up of the story, media sources revealed that Mr Morgan had travelled to Europeat the expense of the publicly-funded ATN four days after he was elected toparliament in October 1996. The chief executive of ATN has claimed that

10 New Zealand


Mr Morgan’s European trip was unauthorised by the company. Inconsistencieshave also been identified between what Mr Morgan claims he was paid by ATNfollowing his August 1996 resignation from the company, and what is recordedin the ATN records. Mr Morgan had earlier this year assured his party leader,Winston Peters, that he had not had any involvement with ATN since resigningto concentrate on his election campaign.

The new allegations against Mr Morgan have led to more opposition calls forhim to resign from parliament. The deputy leader of the Labour Party, MichaelCullen, urged the government to sack Mr Morgan and labelled his reportedactivities as being more typically associated with “banana republic” govern-ments run by “sleaze, favouritism and incompetence”. Both Mr Bolger andMr Peters, have said that they will stand by Mr Morgan unless he is foundguilty of criminal wrong-doing by an investigation being conducted by theSerious Fraud Office (SFO) on ATN. The SFO investigation was launched earlierthis year following the first allegations of improper activities concerning ATN’sfinancial management. A complaint made to the police by the ACT leader,Richard Prebble, at the beginning of May alleging criminal misconduct byMr Morgan has also been added to the SFO investigation. The investigation isdue to be completed by early June.

—but goes on fighting— Mr Morgan has refused to answer questions in parliament and the media abouthis involvement with ATN, on the grounds that the matter is sub judice.Mr Morgan has also filed a defamation suit in the High Court against a LabourMP, Trevor Mallard, and two television channels, TVNZ and TV3, over alleg-ations they made concerning Mr Morgan’s involvement with ATN. Mr Morganhas rejected calls for his resignation from parliament, saying that he has noth-ing to hide. But while the coalition leaders remain supportive of Mr Morgan,many National MPs are less sympathetic to his predicament.

—while a colleague laysinto the media

The Maori affairs minister and New Zealand First deputy leader, Tau Henare,has also entered the fray. Mr Henare is the brother-in-law of Mr Morgan andalso his neighbour. When a TV3 reporter attempted to interview Mr Henareand Mr Morgan on the ATN allegations, Mr Henare is alleged to have sworn athim and threatened to use his powers as a cabinet minister to cancel govern-ment funding grants to TV3. Mr Henare later said the reporter was lucky not tobe “whacked” for approaching his house. Mr Henare’s actions appear to haveincreased tensions between the coalition partners. Mr Bolger said Mr Henare’sbehaviour was unacceptable, but he added that it was not the first time that“injudicious” remarks had been made by a senior MP.

Mr Peters falls out with aNational MP—

Mr Henare’s clash with a member of the media is not his first in recent months.In early March Mr Henare apologised to a radio reporter, after stopping himrecording and observing an altercation on March 5 between Mr Peters and aNational backbencher, John Banks, outside the parliamentary debating cham-ber. The fracas between Mr Peters and Mr Banks highlighted policy as well aspersonal tensions between the coalition partners: it came after the adjourn-ment of a late night parliamentary session, during which the government hadnarrowly won a vote by 61 to 59 to postpone this year’s planned tax cuts byone year. The postponement of the scheduled tax cuts was a key feature of the

New Zealand 11


October 1996 coalition agreement, being designed to facilitate increased socialexpenditure proposed by New Zealand First. Mr Banks had earlier voiced hisopposition to the postponement.

—and is castigated by theparliament’s privileges

committee

Mr Banks accused the New Zealand First leader of abusing, pushing and shak-ing him during their heated exchange. Both Mr Banks, and the Alliance leader,Jim Anderton, who witnessed the incident, laid formal complaints before theparliamentary Speaker about Mr Peter’s conduct. Mr Peters formally apologisedto Mr Banks in parliament the following day but claimed during a subsequentradio broadcast that he had never touched Mr Banks. A decision by parlia-ment’s privileges committee in mid-May refuted this claim and ruled thatMr Peters had assaulted Mr Banks, but it did not find him in contempt ofparliament. (For Mr Peters to have been in contempt of parliament, the com-mittee would have had to prove the assault occurred as a result of Mr Banks’sconduct in parliament.)

The committee invited Mr Peters to apologise to parliament for his “unacceptableand unbecoming” behaviour. However, Mr Peters has defiantly refused toapologise, and accused the committee of being a “kangaroo court”. By doing so,Mr Peters has further heightened tensions within the coalition and increasedthe risk of isolating himself within the government. The committee’s ruling wasa unanimous decision and members of the committee included some seniorNational ministers: the minister of justice, Doug Graham, the attorney-general,Paul East, as well as Mr Bolger.

National suffers in theopinion polls—

Concerns from within the National caucus that the actions of its New ZealandFirst MPs are damaging the coalition appear to be backed by recent opinionpoll results. Since signing the coalition agreement in October 1996, support forNew Zealand First has slumped from around 15% of the “party vote” to only4-5% in April and May. (The “party” vote is that cast by electors for MPsreturned from party lists; they also have separate votes for electing local con-stituency MPs.) Similarly, support for Mr Peters as the preferred prime ministerhas fallen from around 15% prior to the election, to only 4% in May.

Support for National also appears to be slipping. This is in contrast to earlierthis year when the ATN revelations first emerged, causing a sharp dip in sup-port for New Zealand First but leaving National relatively unscathed. One pollin May (One Network News/Colmar Brunton) found that Labour was the mostpopular party, the first time that this has happened since 1993. The Labourleader, Helen Clark, was also the most popular potential prime minister.

—raising questions aboutits leadership—

National’s declining support in the polls has raised questions about the futureleadership of the party. Mr Bolger successfully managed the transition to themixed member (MMP) electoral system by overcoming strong personal antipa-thy between himself and Mr Peters to court New Zealand First into a coalitiongovernment. He is committed to maintaining stability within the coalition andensuring it lasts its full three-year term, but this commitment is increasinglyplacing him in an awkward position within his own party.

The fifth-highest ranked minister in the government, Jenny Shipley, hasemerged as a potential contender for the leadership position, although she has

12 New Zealand


predictably dismissed talk of a leadership challenge as “baseless speculation”and probably lacks enough support to mount a challenge this year. Mrs Shipleyis seen as representing the interests and traditional ideology of the Nationalparty. Mr Bolger responded in early May to growing speculation of a possibleleadership challenge by firmly stating that he intends to lead National and thegovernment for at least the next four years.

—and superannuationmay prove a flash point

Mrs Shipley has already made an outright attack on the compulsory super-annuation (ie pensions) scheme being promoted by Mr Peters (see Economicpolicy). Mrs Shipley claims that only 10% of women, and 50% of men willactually achieve the targeted amount of saving under the scheme by the age of65. Mr Peters reacted angrily to Mrs Shipley’s attack by cautioning MPs againstspeaking out against the scheme until its details were released. He alsoincreased speculation about Mrs Shipley’s leadership prospects by warning hiscolleagues to “address the issues of long-term sustainability and not use theirpositions for short-term political gains”.

Under the coalition agreement, individual MPs have the right to publicly arguefor or against a compulsory savings scheme. Within the coalition, support forthe scheme is broadly divided along party lines, with the majority in Nationalfavouring a system of voluntary retirement savings, rather than a compulsoryarrangement. Mrs Shipley is the highest-ranking, but not the only, govern-ment minister to have spoken out against compulsory superannuation. Othershave included the education minister, Wyatt Creech, the health minister, BillEnglish, and the environment minister, Simon Upton.

Mr Peters finds selling hisscheme difficult

In contrast, the pitch to sell the savings scheme to the New Zealand voter isbeing made almost single-handedly by Mr Peters, with only implicit supportfrom his New Zealand First colleagues. Mr Bolger has been guarded with hiscomments, saying that he hopes a compulsory scheme that he can support canbe designed, while also claiming the present system cannot be maintainedwithout a major overhaul. However, Mr Bolger opposes Mr Peters’s desire toentrench in legislation any compulsory superannuation scheme approved byreferendum. Entrenchment would lock future governments into supportingthe scheme, and any future modification or abandonment of the schemewould require the support of 75% of all MPs, something which might be verydifficult to obtain.

ACT courts disgruntledNational supporters

The radical right-of-centre ACT New Zealand party continues to target Nationalsupporters who are in favour of reduced government spending, a principleseemingly abandoned by the coalition government. Support for ACT in thepolls has grown since the beginning of the year, on the tail of a highly publicised“perk-busting” campaign led by an ACT MP, Rodney Hide, to expose excessiveconsumption by MPs. Mr Hide has not been short of examples of profligacy,including an admission by an opposition MP that he ran up a taxi bill totallingnearly NZ$30,000 (US$21,000) in 1996. Figures obtained by Mr Hide reveal anaverage of NZ$192,000 per minister was spent on chauffeur-driven limousinetravel in the 1996 financial year. (Most ministers are on a NZ$126,000 annualsalary.) Mr Hide’s revelations have generated intense public indignation at the

New Zealand 13


lack of controls on spending by MPs and are likely to lead to a review of theparliamentary perk system.

Accompanying Mr Hide’s campaign has been an assault by the ACT leader,Richard Prebble, on government plans to approve the construction of aNZ$94m four-storey ministerial building. Mr Prebble has received considerablepublic support for a review of the cost of the building, which he has labelled apalace built in the “neo-Stalinist style”. Cabinet intentions to approve thebuilding received a set-back in mid-May when a parliamentary select commit-tee called for public submissions on the building. A 200,000-signature publicpetition opposing the building has been presented to the government.

Defence spending mayincrease

Statements made by Mr Bolger in early May suggest that the government isconsidering increasing its future defence spending. At the launch of the secondAnzac frigate in Melbourne, Mr Bolger stated that it was the government’sbroad intention to ensure that defence-equipment spending over the next fewyears would “enable the effective capability of the New Zealand Defence Forceto be maintained”. Mr Bolger said that the government expects to make dec-isions later this year on a “significant programme of investment”. This is likelyto mean that the government will consider taking up an option made by theAustralian government to purchase a further one or two frigates in addition tothe two Anzac frigates delivered earlier this year (1st quarter 1997, page 15).The Australian government is keen for New Zealand to take up the extra frig-ates purchase option, although Mr Bolger will remember that the purchase ofthe original two frigates from Australia met with substantial public opposition.Mr Bolger has also stated that increased defence spending will have to beweighed up against the need for social spending.

There is a possibility of afree-trade agreement with

the USA

The US government has raised the possibility of the establishment of a free-tradeagreement between the USA and New Zealand. The international trade minister,Lockwood Smith, is to meet with the US trade representative, CharleneBarshefsky, to discuss the proposal at the end of May. Mr Smith is optimisticthat an agreement similar to New Zealand’s Closer Economic Relations (CER)agreement with Australia can be reached, although the challenge will be toinclude agricultural exports in a deal. (The USA’s existing North American FreeTrade Agreement with Canada and Mexico excludes agriculture.)

Economic policy

Government spending willincrease

Mr Peters gave an indication of the government’s spending intentions for the1997/98 financial year when he delivered the Budget Policy Statement (BPS) onMarch 5, 1997. (The Fiscal Responsibility Act 1994, which commits the govern-ment to prudent fiscal policies and public-debt reduction, requires the releaseof such a statement before the end of March each year. The BPS must outlinethe government’s strategic priorities for the budget, as well as both its short-and long-term fiscal plans.)

The BPS reaffirms the pledge made under the government’s December 1996coalition agreement to increase social expenditure, especially in the health andeducation sectors, while continuing to reduce public debt, maintaining budget

14 New Zealand


surpluses and attempting to progressively reduce personal tax rates over thenext three years. However, the proposed increase in expenditure of NZ$950min fiscal year 1997/98 is NZ$250m lower than the NZ$1.2bn figure given in theoriginal coalition deal. Mr Peters says that this reduction was to allow for astaged implementation of new policy programmes.

The government remains committed to increasing fiscal expenditure by NZ$5bnin aggregate over the next three years, above the levels forecast by the Treasuryin its December 1996 Economic and Fiscal Update (DEFU). (The projections inthis document were made on the assumption of no policy changes.) The short-fall in additional spending for 1997/98 between the coalition agreement and theBPS will be made up in 1999/2000, when additional spending is forecast to beNZ$2.4bn, up from NZ$2.1bn forecast in the coalition agreement. The policystatement indicates that the 1997/98 budget will target the following priorityareas for increased spending:

• early childhood education;

• mental and childhood health services;

• a “green” (environment) package; and

• the first stages of implementing training and work schemes for theunemployed.

NZ Post may lose itsmonopoly position—

Despite its acquiescence to these spending initiatives, economic policy develop-ments in recent months suggest that National is exercising its position as seniorpartner in the coalition to introduce a range of policies designed to result ingreater deregulation and reduced state control in the economy. In a majorinitiative, the government has announced its intention to deregulate the oper-ations of the state-owned NZ Post. The communications minister, MauriceWilliamson, introduced a bill in mid-April to remove NZ Post’s monopoly onthe domestic delivery of standard letters. NZ Post’s regulated monopoly cur-rently makes it the only carrier for all domestic letters weighing less than200 grams, and costing NZ$0.80 or less. The Postal Services Bill plans tointroduce competition in the delivery of standard letters by April 1998, andgive competitors the right to print their own postage stamps within the nextfive years.

Since being corporatised (ie made to operate like a private-sector company) bythe government in July 1987, NZ Post has become one of the most efficient andprofitable post offices in the world. In the decade since corporatisation, NZ Posthas expanded the amount of mail carried by over two-thirds while reducingreal costs by one-third. Staff costs have been shaved from 73% of total oper-ating costs to 51%, and the company offers the lowest standard domestic letterprice among the OECD countries, with the exception of Spain and Turkey (thepost offices of which are government-subsidised). In the year to March 1996,NZ Post produced a record profit of NZ$75m.

The benefits NZ Post gets from its monopoly on standard letter delivery aresignificant. In the year to March 1996 turnover from standard letter delivery wasNZ$238m and generated a pre-tax profit of NZ$47.8m. This represented profit/turnover ratio of 20%. In contrast, NZ Post’s turnover from its non-protected

New Zealand 15


postal services was nearly double the standard letter services revenue atNZ$409m, but produced an almost equal pre-tax profit of NZ$47m. Theprofit/turnover ratio for unprotected services was therefore only 11%.

—despite Labourobjections—

NZ Post is currently required by the government to keep a cap on the price ofdelivering a standard letter of NZ$0.45 (for the next three years), subject tochanges in inflation. This cap applies to all areas, including remote ruralregions that incur higher delivery costs than urban centres. It is uncertainwhether this agreement will be renewed at the end of the three years and theLabour leader, Helen Clark, has attacked the government for failing to have along-term commitment to guaranteed mail deliveries at reasonable prices to alladdressees.

Ms Clark also accused the government of making the first step towards theprivatisation of NZ Post. Mr Williamson denies that NZ Post is to be privatised,since its sale is prohibited under National’s coalition agreement with NewZealand First. The main beneficiaries of the deregulation of NZ Post are likelyto be businesses who post bulk volumes of mail. Competitors for NZ Post’sbusiness are likely to emerge in this area, rather than in the household maildelivery market.

—and furtherprivatisations are

possible—

Privatisation of state assets is a sensitive political issue, and National’s coalitionwith New Zealand First was widely interpreted as marking at least a temporaryhalt to all state asset sales. (New Zealand First had campaigned for the October1996 election on an economically nationalistic platform that advocated ban-ning the sale of state assets to foreign interests.)

However, senior National ministers have indicated that further privatisationsmay occur over the next three years. Mr Bolger stated in early April that al-though the coalition agreement meant several key assets are “off limits” forprivatisation (including the Electricity Corporation of New Zealand—ECNZ,Transpower, NZ Post and selected broadcasting organisations), other areascould be explored. Mr Bolger favours a continual reappraisal of the govern-ment’s role in the economy, with an emphasis on encouraging a greater role forthe private sector. The minister of state-owned enterprises, Jenny Shipley, hasalso indicated that deregulation is on her agenda. Mrs Shipley believes that thedominance of ECNZ in the electricity generation industry is unsatisfactory andhas indicated that she favours a review of the current memorandum of under-standing between ECNZ and the government in order to move towards a morecompetitive market. She also has indicated that a review of Transpower’smonopoly position as the controller of the national electricity grid may becalled for in the future.

—while government-imposed monopolies may

be under threat

Another proponent of a smaller public sector and continued deregulation is thecommerce minister, John Luxton. Mr Luxton claims that the size and role ofthe government is still too big, and he favours a reduction of government-imposed monopolies on pharmacies, optometrists and lawyers, and a reduc-tion in the powers of the producer boards, which control the export marketingof primary produce.

16 New Zealand


A study says NewZealanders are

over-taxed—

Mr Luxton may look to the recent findings of an Inland Revenue Department(IRD) commissioned study into the New Zealand tax system to support his bidto reduce government involvement in the economy. As part of the requirementsof the Fiscal Responsibility Act 1994, the IRD must examine and evaluatethe state of the tax system. In 1995 the IRD commissioned an economist special-ising in taxation from the University of Texas, Dallas, Professor Gerald Scully, toinvestigate New Zealand’s taxation levels. Professor Scully’s report, releasedrecently, found that New Zealanders had been overtaxed throughout the post-war period. New Zealand’s taxation as a proportion of GDP is between 38% and40%. Professor Scully concluded that if an optimal tax rate equivalent to a total(income) tax take of 19.7% of GDP had been applied throughout the period1946 to 1994, New Zealand’s real GDP would have been NZ$136bn in 1994(using 1988 dollars) instead of its actual $70.6bn. The inference is that NewZealanders are over-taxed by 50%. The research estimates that there was a loss ofoutput between 1946 and 1994 equivalent to $1.17trn (in 1988 dollars) due totaxes being set higher than the optimal level required to encourage economicgrowth.

Professor Scully claims that taxation as a share of GDP has not been shrinkingdespite last year’s tax cuts, and argues that taxation levels need to be set aroundone-third lower if economic growth rates of more than 5% per year are to bereached.

—but future cuts will notbe dramatic—

Further tax cuts are on the government’s agenda, but are unlikely to meet therecommendations of the IRD commissioned study. The personal tax cuts origi-nally legislated to be introduced on July 1, 1997 have now been deferred forone year to accommodate the proposed increase in social expenditure by thecoalition government. In addition, BPS suggests that further tax cuts proposedfor 1999-2002 may be contingent on the September 1997 referendum support-ing the introduction of a compulsory superannuation savings scheme fromJuly 1998. The BPS indicates that if the referendum rejects the scheme, furthertax cuts will only be considered, not guaranteed, regardless of whether thegovernment is running budget surpluses to finance them Mr Peters hinted inmid-March that a lowering of corporate tax rates could feature in the govern-ment’s medium- to long-term economic strategy if the government maintainedsubstantial budget surpluses to 2000.

—and there will betougher penalties for tax

evasion

The IRD introduced tougher penalties for tax evasion and avoidance by busi-nesses on April 1. Key changes affecting companies are new penalties for late,under, or non-payment of GST (goods and services tax) and PAYE (pay-as-you-earn) tax. Tax evasion now results in a penalty of 150% of the amount owedand the possibility of longer prison sentences, while lack of reasonable care orgross carelessness leading to an understatement of tax owed will also be penal-ised by a penalty of 20-40% of the sum owed.

Superannuation proposalsare still sparse on detail

As mentioned above (see The political scene), the government is committed toholding a national referendum on New Zealand First’s proposals for a compul-sory superannuation scheme. This referendum will be held using a postal vot-ing system between September 5 and September 26, with the results of thedecision known by early October. An independent four-person panel has been

New Zealand 17


established with the responsibility of educating voters on the options to beoffered in the referendum. Mr Peters has released more information on thestructure of the scheme, although the Treasury-led team designing it is notexpected to release full details before early June, with final proposals released ina White Paper in July.

The scheme will probably be annuity-based, with people eventually contrib-uting 8% of their annual income into their choice of government-approvedsaving funds. Upon reaching the retirement age of 65, contributors would pur-chase an annuity (a financial instrument giving them regular guaranteedincome in return for a one-off payment) for their retirement. The governmentwill provide a guaranteed top-up system for people unable to save the targetamount through loss of income during their working years (for example,women who leave the workforce to have children). Accumulated funds will notbe able to be withdrawn as lump sums, although savings will be given to aperson’s estate if he or she dies before retirement. A savings target for eachindividual will be set and adjusted every five years. Mr Peters indicated that thistarget could be around NZ$160,000 (US$110,000). People who reach the targetwill be free to either stop saving or withdraw surplus savings as a lump sum.

Some critical concerns have yet to be addressed. It is not yet known howearnings from property investment could fit into a scheme, although Mr Petershas said that the design team are investigating ways to allow equity in homesor other properties to be used as a part-contribution. Another unclear area iswhat impact the introduction of a compulsory savings scheme (if supported inthe referendum) will have on the existing state-run National Superannuationscheme. Earlier this year Mr Peters was indicating a scheme broadly based onthe one promoted by his New Zealand First party in the October 1996 election,which would retain National Superannuation and use it as a top-up for thecompulsory savings scheme. However, in mid-April the Mr Peters proclaimedthat the National Superannuation scheme would “become more expensive[and] an ever-increasing unsustainable burden on society.”

The Employment Court isreviewed

The minister of labour, Max Bradford, has ordered a review of the operation ofthe Employment Court, as part of a strategy outlined in the government’scoalition agreement to strengthen aspects of the controversial EmploymentContracts Act (ECA), and also to make it fairer. The government is concernedthat rulings made by the court may be inconsistent with the original intentionsof parliament when it passed the ECA in 1991. Anecdotal evidence suggeststhat the court may be taking an excessively strict stance on the correctprocedure for employers to use when dismissing staff for poor performance.This may have resulted in the court overturning justified dismissals due to aminor procedural infringement by the employer, and thereby requiring themto either reinstate the employee or pay substantial compensation for unfairdismissal. According to Mr Bradford, this could be preventing some employersfrom hiring staff or from dismissing employees for poor performance.

18 New Zealand


The economy

Slower growth, but notstagnation—

The latest national account statistics confirm that the rate of economic growthhas been slowing over the past couple of years. Expenditure-based GDP grew by1.9% in 1996 (calendar year), compared with growth of 2.8% in 1995, and 5.8%in 1994. However, although the rate of growth has slowed, the economy is notclose to stagnating: GDP by expenditure grew by 0.6% in the final quarter of1996, and was 2.1% higher than in the equivalent quarter a year earlier.

Real expenditure on gross domestic product(% change, quarter on quarter; seasonally adjusted at constant 1991/92 prices)

1995 1996 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr

Private consumption 1.1 2.2 0.8 –0.6 0.3

Public consumption –0.3 0.3 0.6 –1.4 1.4

Gross fixed investment 7.2 0.3 1.1 1.1 –2.4

Total domestic demand 1.6 1.6 0.2 0.3 –0.7

Exports of goods & services 0.5 –0.8 2.5 2.5 2.1

Imports of goods & services 2.4 3.4 1.6 0.8 –1.6

GDP 1.0 0.3 0.5 0.8 0.6Source: Statistics New Zealand, Gross Domestic Product

—despite a fall indomestic demand in the

fourth quarter—

Economic growth in the fourth quarter of 1996 was pulled down by a 0.7%decline in total domestic demand compared with the previous quarter. A meagre0.3% increase in private consumption failed to offset a 2.4% decline in grossfixed investment over the quarter. Contributing to this decline was a 14%decrease in investment in transport equipment as well as a 4% decline in non-residential construction as major projects, such as the Sky casino/hotel complexin Auckland and the Museum of New Zealand in Wellington, neared comple-tion. Year on year, however, total domestic demand has continued to rise: in thefourth quarter of 1996 it was 1.5% higher than in the fourth quarter of 1995.

—as exports rise GDP growth depended instead on rising exports. Exports of goods and servicesgrew by 2.1% in the fourth quarter of 1996, following a 2.5% improvementover both the second and third quarters. Exports were 6.3% higher in thefourth quarter of 1996 than in the same quarter in 1995. Contributing to muchof the increase in exports in the final quarter of 1996 was a surge in dairy exportvolumes. Favourable grazing conditions and increased herd sizes boosted dairyproduction to record levels and meant that dairy exports were 34% higher inthe final quarter of 1996 than a year earlier.

Imports of goods and services fell by 1.6% in the final quarter of 1996. How-ever, imports of goods and services were still 4.2% higher in the fourth quarterof 1996 than the same quarter a year earlier.

Production-based figuresalso indicate a slowdown

Due to the use of different datasets and estimation techniques, there is often amarked discrepancy between the expenditure-based and production-basedmeasures of GDP released by the national statistical agency, Statistics NewZealand. This is particularly noticeable with the annual GDP figures for thecalendar year 1996. The expenditure-based measure puts annual economicgrowth for 1996 at 1.9%, whereas the production-based figure for the same

New Zealand 19


period is 2.7%. Statistics New Zealand considers its production-based measureof GDP to be more accurate because it is less susceptible to quarterly volatilityand valuation problems; most developed countries concentrate instead on theexpenditure measure.

Gross domestic product by sector(% change, quarter on quarter; seasonally adjusted at constant 1991/92 prices)

1995 1996 4 Qtr 1 Qtr 2 Qtr 3Qtr 4 Qtr

Agriculture –2.1 2.4 1.4 –0.2 1.9

Fishing, forestry & mining –1.2 0.2 1.6 5.1 –7.7

Manufacturing 1.6 0.1 –0.9 1.3 1.4

Electricity, gas & water 1.9 –0.3 –1.2 –3.1 5.8

Construction 2.1 2.8 –0.2 2.6 1.5

Wholesale –0.2 –1.3 0.6 –0.2 2.4

Retail 0.1 2.7 –0.2 –1.0 0.0

Restaurants & hotels –0.3 2.5 1.0 0.7 –1.2

Transport & communications 1.9 2.2 1.1 1.6 2.4

Finance 0.8 1.2 0.9 2.2 0.8

Personal & community services 0.5 0.5 2.4 4.2 –1.4

General government 0.6 0.7 –0.6 –0.2 0.7

Owner occupied dwellings 0.4 0.3 0.4 0.4 0.4

Unallocated –1.7 4.4 –5.4 –6.0 1.6

GDP 0.4 0.9 0.4 0.8 0.7Source: Statistics New Zealand, Gross Domestic Product.

Transport,communications and

manufacturing do well—

The increase in production-based GDP over the fourth quarter of 1996 was 0.7%.The largest contributions to this increase came from the transport, communi-cations and manufacturing sectors. Transport and communications activityexpanded by 2.4% in the fourth quarter of 1996, and grew by 8.4% in 1996 as awhole. Helping drive growth in this sector was the sustained and high level ofactivity in the communications industry. Manufacturing expanded by 1.4% inthe final quarter of 1996 but grew by only 1% over the 1996 calendar year(compared with annual growth rates of 4.1% in 1995 and 6.3% in 1994).Increased manufacturing output in the fourth quarter of 1996 was mainly theresult of strong growth in primary food production derived from higher farmoutput of dairy and meat products. A recent expansion of capacity at the TiwaiPoint aluminium smelter boosted aluminium production in the final quarter of1996, contributing to increased output from the basic metals manufacturingsector.

—but fishing, mining andforestry falter

The largest drop in economic activity in the fourth quarter occurred in fishing,forestry and mining. Output from this sector fell by 7.7% over the quarter andwas 1.2% lower over the 1996 calendar year than in 1995. Mining activitydropped by a large 13.4% between the third and fourth quarters, due to re-duced oil and gas extraction as demand for gas to be used in thermal electricitygeneration weakened. Forestry and logging output also weakened over thequarter, possibly in response to lower log prices. However, thanks in large partto the dairy sector, agricultural output rose by 1.9% in the fourth quarter of1996, and by 2.1% in calendar year 1996.

20 New Zealand


Prices, wages and employment

Consumer price inflationfalls—

The consumer price index (CPI) experienced its biggest quarterly drop for36 years over the first quarter of 1997. The CPI fell by 0.3% in the first quarterto produce a year-on-year “headline” inflation rate of 1.8%, the lowest annualrate of increase since the third quarter of 1994. The main contributors to thisdrop in inflationary pressure were reductions in mortgage and other retaillending rates, as well as lower prices for transport, clothes and footwear.

Consumer prices, headline measure

1996 19971 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr

Index (4 Qtr 1993=1,000) 1,063 1,071 1,077 1,085 1,082 % change, quarter on quarter 0.5 0.8 0.6 0.7 –0.3 % change, year on year 2.2 2.0 2.4 2.6 1.8Source: Statistics New Zealand, Consumers Price Index.

The “underlying” rate of inflation calculated by the Reserve Bank of NewZealand increased by 0.2% in the first quarter of 1997 to produce an annualrate of 2%. The underlying rate excludes the effects of interest rate charges andsome other one-off changes.

—and input and outputprices edge up only slowly

The average level of input prices (excluding wages and depreciation) purchasedby New Zealand industries rose slightly by 0.1% in the fourth quarter of 1996,following a 0.2% rise in the third quarter. Producer input prices were 0.4% inthe fourth quarter of 1996, compared with the equivalent quarter a year earlier.The main contributors to the rise in the all-industries inputs index over thefinal quarter of 1996 were higher prices for crude oil, and sheep and lambproducts. These price increases were partly offset by reductions in prices forforestry products, car kits, wool and basic metals. Producer output prices alsorose in the fourth quarter of 1996, by 0.2% on the previous quarter and were0.6% higher than in the fourth quarter of 1995. The higher sheep and lamblivestock and meat input prices were the main contributors to the fourth-quarter increase in producer output prices, although these were partially offsetby lower wool, forestry product and basic metals prices.

Public-sector wages risefaster than private-sector

wages

Salary and wage rates (including overtime) paid to employees rose 0.7% in thefourth quarter of 1996, and were 2% higher than in the year-earlier period.Public-sector wage and salary rates increased by 2.5% in the year to the fourthquarter, exceeding a 1.8% increase over the same period for private-sectorsalaries and wages. The highest industry increases in salary and wage labourcosts for the year to the fourth quarter of 1996 occurred in central governmentservices (up 2.7%) and private non-profit services (also up 2.7%). The annualincrease in salary and wage rates for central government services was the largestfor that sector for five and a half years.

Employment growthstalls—

Growth in the total number of people in employment (seasonally adjusted)appears to have stalled. The total number in employment dipped by 0.1% inthe first quarter of 1997, following a 0.5% drop in the final quarter of 1996.However, for the 12 months to the first quarter of 1997, the total number in

-7

-6

-5

-4

-3

-2

-1

0

1992 93 94 95 96 97 98 99 2000`01

Current-account deficit (a)% of GDP

(a) Based on IMF method of calculation. Source: EIU.

New Zealand 21


employment grew by 1.1% (compared with the 12 months to March 1996). Thelargest increases according to industry in the 12 months to the first quarter of1997 were recorded in the business and financial services industry (up by12.4%), community, social and personal services (up by 3.1%), and transport,storage and communications (up by 7.9%). In contrast, employment in theagriculture, hunting, forestry and fishing industry group contracted by 10% inthe year to the first quarter of 1997.

Seasonally adjusted full-time employment edged up by 0.1% in the first quarterof 1997 and was 0.6% higher than the same quarter a year earlier. Seasonallyadjusted part-time employment fell by 0.5% in the first quarter but expandedby 2.7% on the first quarter of 1996. A small increase in the working-agepopulation boosted the labour force participation rate from 65.4% in the finalquarter of 1996, to 65.7% in the first quarter of 1997. The participation rate inthe first quarter of 1996 had been 65.6%.

—and the unemploymentrate rises

The seasonally adjusted unemployment rate increased from 5.9% in the fourthquarter of 1996 to 6.4% in the first quarter of 1997. The unemployment rate inthe first quarter of 1996 was 6.2%. The recent volatility in the unemploymentfigures can be attributed to changes in “abatement” rates for social welfarebenefits introduced in July 1996. These changes increased the amount of in-come beneficiaries can earn before having their benefit reduced.

Money and finance

Mr Brash prompts a fall inthe trade-weighted index—

The New Zealand dollar’s trade-weighted index (TWI) was relatively steadyuntil early May. (The TWI weights bilateral exchange rates according to partnercountries’ shares in New Zealand trade.) The Reserve Bank of New Zealand hadindicated in its March 1997 Economic Projections that to keep annual underlyinginflation to the middle of the 0-3% target, the TWI should be around 68(1979=100) and 90-day bill rates around 7.5%. The TWI averaged around68.5 to 68.6 in February to April but then moved upwards to 69 from mid-Aprilafter the release of lower than expected inflation figures. Comments by theReserve Bank governor, Don Brash, at the beginning of May that monetaryconditions were “still slightly firmer” than the Reserve Bank wanted, caused adrop in the TWI back down to around 68.0 (on the expectation that interestrates would fall slightly).

Interest and exchange rates(% unless otherwise indicated; period averages)

1996 19971 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr

90-day bank bill rate 8.7 9.1 10.0 8.9 7.5

5-year government stock 7.7 7.8 8.4 7.2 7.4

10-year government stock 7.4 7.6 8.3 7.3 7.5

Base lending rate 11.8 12.2 12.8 12.4 11.5

First mortgage rate 10.4 11.0 11.5 10.7 9.6

NZ$:US$ 1.49 1.49 1.44 1.42 1.43

Currency index (1979=100) 64.3 60.9 66.0 67.1 68.4Source: Reserve Bank of New Zealand, Weekly Statistical Release

22 New Zealand


—resulting in a drop inthe 90-day bank bill rate—

Dr Brash’s comments also affected the level of 90-day bank bills (a key deter-minant of home mortgage rate levels). The 90-day bill rate, which had averagedaround the 7.5% mark throughout February to April, fell to 7% at the start ofMay. Also influencing this drop was market reaction to the lower than expectedinflation figures released in mid-April. Dr Brash effectively halted further easingof monetary conditions a week later when he told the parliamentary financeand expenditure select committee that the bank had not changed its desiredlevels of interest rates and the exchange rate.

The confused messages sent out by the Reserve Bank and its governor causedsome criticism from financial dealers. This prompted the Reserve Bank to takethe unusual step of issuing a statement responding to the criticism on May 14.Dr Brash denied their had been no “flip-flop” in his stance on monetary policyand said that the bank had not changed its view on the desired monetaryconditions since the release of its Economic Projections in March.

—which pulls downmortgage rates

This easing of the 90-day bank-bill rate since mid-April has resulted in all majorbanks and lending institutions dropping their fixed and floating mortgagerates. Floating mortgage rates, which ranged between 9.4% and 9.95% in lateFebruary have dropped to a new range of 8.25% to 9.4% for most lenders (andeven lower for a couple of institutions).

Banque Nationale de Pariswill establish a branch in

Auckland

Banque Nationale de Paris registered as a bank in New Zealand with the ReserveBank in March 1997. The French bank will operate a branch in Auckland. Thebank’s registration with the Reserve Bank brings the total number of banksregistered in New Zealand to 18.

EFT-POS infrastructureleads the world

New Zealand has the most EFT-POS (Electronic Fund Transfer at the Point OfSale) terminals per head in the world, according to figures released by the NewZealand Bankers Association in April. New Zealand has one EFT-POS terminalfor every 78 people compared with one for every 106 people in France, onefor every 115 in Britain, one for every 132 for Australia, and one for every1,167 people in Germany.

Sectoral trends

Fire blight discoveryprompts a row with

Australia

The discovery of fire blight (a disease that affects apple trees) in Australia byNew Zealand scientists has caused tensions in the trans-Tasman relationship.Australia has maintained a ban on imports of New Zealand apples for the past70 years on the grounds that Australia is free of fire blight, whereas some NewZealand orchards have the disease. (This gives Australia a legitimate reasonunder World Trade Organization, WTO, regulations to ban apple imports.)

The discovery in April and May by the New Zealand scientists of the fire blightdisease in botanical gardens in Melbourne and Adelaide has led to calls by NewZealand interests for an end to the ban on its apple imports. The Australianresponse has been less than favourable. Australian growers’ associations andmedia accused New Zealand interests of “sabotage” by formulating a plot todamage Australia.

New Zealand 23


Although Australia has confirmed that it does have the fire blight disease, theAustralian primary industries minister, John Anderson, said in late May thatthere were absolutely no grounds to change Australia’s stance on banningNew Zealand apple imports. This raises the prospect that the dispute could endup before the WTO. The New Zealand scientists at the centre of the issue havecountered the sabotage allegations with a claim that the blight found inMelbourne had been established for over ten years.

Meat board downgradesbeef produced with

growth hormones

The Meat Producers Board bowed to consumer-based pressure in May when itstopped beef produced with growth hormones from carrying its new qualitymark. (Hormone treatment reduces fat on animals and increases the propor-tion of lean meat by building muscle tissue.) Previously, the board hadaccepted advice from the agriculture ministry that beef produced using hor-mone-treated animals posed no health risk to humans. A retailers’ lobby repre-senting 80% of domestic meat sales had not been convinced by this assuranceand had said they would ban hormone growth promoted (HGP) beef.

The food retailers’ position is supported on the international trade front by theEU, which has banned imports of HGP-treated beef. However the EU has beenchallenged on its decision by the WTO, which has ruled that there is noscientific justification to ban hormone-treated beef because it poses no threatto human health. The Meat Board’s handling of the issue has confused beeffarmers, who are unsure whether or not they should abandon using hormonegrowth treatment.

Dairy farmers do notexpect higher payouts

Despite the New Zealand Dairy Board predicting record production levels forthe past year, it has warned dairy farmers not to expect higher payouts. TheDairy Board’s forecasts for a final base payout to producers of NZ$3.15 to$3.20/kg of milk solids have remained unchanged from earlier this fiscal year,even though sales turnover rose by 20% to a record NZ$6.1bn and exportssales, totalling $4.1bn, increased by 10.8%. The reasons that payouts are notlikely to be increased include the negative impact of a high New Zealand dollarover the past year, and the fact that the Dairy Board had to dispose of much ofthe extra production in the commodity markets, rather than processing it intohigher-value-added goods.

The future of theGlenbrook steel plant is

uncertain

The future of the BHP NZ Steel plant at Glenbrook, south of Auckland, isuncertain. In late-April its owner, the Australian-based BHP, announced asweeping restructuring of its operations that included a proposal to close theGlenbrook plant within ten years. BHP has also threatened to close the plantwithin two years if its returns do not improve. The plant has struggled toremain competitive due to the high New Zealand dollar, depressed inter-national steel prices and weak domestic demand.

In March NZ Steel gained approval from its Australian parent company for anew NZ$27m refit of its main smelter, on the condition that it could findNZ$50m in annual cost reductions. This upgrade is still scheduled to begin inSeptember and would extend the life of the plant by around 15 years. About60% of all production from the annual 750,000 tons of steel produced at theGlenbrook plant is exported.

24 New Zealand


Telecom and ClearCommunications are back

in court

A longstanding wrangle between Telecom and Clear Communications overinterconnection into local telephone services headed back to the law courts inlate-April. This development undid hopes that an interconnection deal signedbetween the two companies in early 1996 would smooth the way for Clear tooffer local telephone call services to business customers over the next five years.

The latest resurfacing of the dispute concerns allegations by Telecom that Clearowes over NZ$1m in outstanding charges. Clear has been paying around 90%of the total amount billed by Telecom for telephone traffic passing between thetwo networks. Telecom claims that the interconnection deal struck betweenthe two companies agreed on the charges Clear would pay to interconnect withthe Telecom network, but that Clear had since disputed these charges. Clearargues that the interconnection deal is “unsatisfactory and unprincipled” andcontravenes the Commerce Act by being anti-competitive.

Foreign trade and payments

The current-accountdeficit contracts in the

fourth quarter—

According to figures from Statistics New Zealand, the current-account deficitfor the fourth quarter of 1996 was NZ$1.3bn, an improvement of NZ$666m onthe revised figure for the third quarter. The current-account balance for theyear to the final quarter of 1996 was in deficit by NZ$3.9bn, equivalent to 4.2%of GDP. This was a NZ$594m deterioration on the deficit for the year to thefourth quarter of 1995, when the deficit was equivalent to 3.7% of GDP. (Thecurrent account forecasts used in Outlook for 1997-98 are based on IMF calcu-lations, which differ from those of Statistics New Zealand.)

Current account, 1996(NZ$ m; balance-of-payments basis)

1 Qtr 2 Qtr 3 Qtr 4 Qtr Year

Merchandise trade balance 241 756 –317 40 720

Invisibles balance –258 –1,412 –1,631 –1,331 –4,632

Current-account balance –17 –657 –1,948 –1,292 –3,914Source: Statistics New Zealand, Balance of Payments.

—owing to a merchandisetrade surplus

The main factor contributing to the improvement in the current account in thefourth quarter of 1996 was a NZ$357m improvement in the actual merchandisetrade balance (balance-of-payments basis). The merchandise trade balance wasin surplus by NZ$40m in the fourth quarter, after recording a NZ$317m deficitin the previous quarter. Adjusting for seasonal fluctuations, the fourth quartermerchandise trade surplus was NZ$368m. This was the third consecutive quarterthat the seasonally adjusted merchandise trade balance has improved.

The custom-based trade statistics provide a more up-to-date indication of tradepatterns. In the first quarter of 1997 the customs-based merchandise tradebalance was in surplus by NZ$26.8m, after being in deficit by NZ$6.3m in thefirst quarter of 1996.

The invisibles balance alsoimproves

The balance on invisibles was in deficit by NZ$1.3bn in the fourth quarter of1996, compared with a deficit of NZ$1.6bn in the third quarter. Contributingto this narrowing of the invisibles deficit was an improvement in the services

New Zealand 25


balance. The services balance was in deficit by NZ$19m in the final quarter of1996, compared with a NZ$562m deficit in the third quarter. Major influenceson this improvement were increased net travel and net transportation earn-ings, as tourist numbers rose over the fourth quarter and New Zealanders tookadvantage of a strong New Zealand dollar to travel abroad.

The deficit on international investment income deteriorated by NZ$268m to ashortfall of just under NZ$2bn in the final quarter of 1996. This reflects the factthat the returns on foreign investments in New Zealand are exceeding incomereturns on investments made overseas by New Zealanders, and is therefore inone sense a sign of economic success, not failure.

Terms of trade deteriorateand foreign debt rises

New Zealand’s terms of trade deteriorated over the final quarter of 1996. Theterms of trade index (New Zealand dollar export prices divided by import prices)fell by 1.5% in the final quarter, after a rising by 0.1% in the third quarter. Theterms of trade index was 3.5% lower than its level in the final quarter of 1995.Export prices fell by 3.1% in the fourth quarter of 1996 and were a substantial7% lower than their level in the year-earlier period. Import prices dropped by1.5% in the fourth quarter and were 3.6% lower than in the fourth quarter of1995. A major contributor to the fourth quarter drop in export prices were lowerdairy prices, which fell by 4.7%. Dairy prices weakened over the last threequarters of 1996. Other key contributors to the overall lower export prices in thefinal quarter of 1996 were: aluminium (down by 7.4%), machinery and trans-port equipment (down by 5.2%), meat (down by 3.3%), and forestry products(down by 2.8%). Import prices fell for non-electrical machinery (down by 6.3%),plastics (down by 4.2%), and transport equipment (down by 0.5%). Offsettingthese price drops in the fourth quarter were higher prices for electrical machin-ery (up by 2.9%) and petroleum and petrol products (up by 2.8%).

New Zealand’s total foreign debt at the end of December 1996 was NZ$79.8bn(US$56.4bn), an increase of 2.3% from the end of September 1996, when ittotalled NZ$78bn, and of 7.1% on the level of debt at the end of 1995. Theincrease in external debt over the three months between September andDecember 1996 was due mainly to an increase in corporate sector debt, whichincreased by 3.9%. Gross public-sector debt declined by 1.4% to NZ$22.3bnover the same period, although there was an increase in official debt denomi-nated in New Zealand dollars. The external debt/GDP ratio was 85% at the endof December 1996 compared with 84.6% at the end of September and 83.6% atthe end of 1995.

Business news

The UK arrests DairyBoard officials—

Coming soon after its battle with the EU over its exports of spreadable butter tothe UK (1st quarter 1997, page 31), the Dairy Board faced new difficulties inmid-April when six of its senior London-based officials were arrested for fraud.UK Customs and Excise charged the six officials with alleged involvement in a£5.4m (NZ$12.8m) excise fraud relating to butter imports to the UK in 1995and 1996.

0

4

8

12

16

20

24

Q3 Q4 Q1 Q2 Q3

NZ$

fc

Public-sector foreign debtNZ$ bn

Source: Statistics New Zealand, New Zealand's Total Overseas Debt.

1995199519951995199519951995199519951995199519951995199519951995199519951995 19961995 19961996

Denominated in NZ$Denominated in NZ$Denominated in NZ$

1995 19961995 19961996

Denominated in NZ$Denominated in NZ$Denominated in NZ$

Denominated in foreign currencies

1995 19961995 19961995 19961995 19961995 19961995 19961995 19961995 19961995 199619951995 1996

Denominated in NZ$

Denominated in foreign currencies

26 New Zealand


The New Zealand Dairy Board admitted that it had not paid the correct levieson butter imported into Europe, but denied any intent to defraud. The board’schairman, Sir Dryden Spring, labelled the arrests a “massive overreaction”.Sir Dryden claims the Dairy Board had received a demand from UK customs topay the outstanding levies, but was disputing this using normal procedures.The Dairy Board claims one of the charges laid against the officials centres ona shipment of butter sent to the UK a few days before new duty rates andregulations were introduced in July 1995. (These new rules were enacted fol-lowing the conclusion of the Uruguay Round of the General Agreement onTariffs and Trade in 1995. This resulted in New Zealand’s butter quota into theEU increasing from 50,000 tons/year to 77,000 tons/year.)

The Dairy Board says that it tried to pay the new levies but the UK customs’computer had not been set up to handle the new rates and rejected the DairyBoard’s payment. The board therefore paid the old lower levy rate and gavecustoms the extra amount for the new rate in a separate account for latersettlement. Another of the charges laid against the officials alleges that theypaid a cheaper tariff on some butter by incorrectly claiming its fat content fellwithin a preferential quota range. Complicating this charge are the differentscientific methods used by New Zealand and Europe for testing the fat contentof butter.

—presenting the NewZealand government with

a dilemma

The arrests presented the New Zealand government with a dilemma. On theone hand, it was placed under pressure from the Dairy Board and New Zealanddairy farmers to intervene directly in the case and protect New Zealand’s tradeinterests, while on the other hand it was requested by the UK government inlate April to assist in the criminal inquiry. After initially taking a hands-offapproach to the issue, the cabinet decided it was obliged under an inter-national agreement to meet the UK government’s request. However, NewZealand’s international trade minister, Lockwood Smith, announced in earlyMay that the government would seek to establish the details the new butterquota regulations with the EU. The first stage of committal for the fraud case isnot scheduled until early July, and the case is expected to take up to one yearin the UK court system.

PepsiCo offers fast-foodshares

A decision in 1996 by the US food and beverage conglomerate, PepsiCo, toseparate its fast-food restaurant businesses from its food and beverage oper-ations resulted in a large share offer in New Zealand in early May. Some85m shares were offered to the public to fund the establishment of a newcompany that will control the 122 Pizza Hut and KFC fast-food franchises inNew Zealand. The public float will result in the first listing of a restaurant sectorstock on the New Zealand Stock Exchange in early June. The move could alsoresult in the introduction to New Zealand of a new fast-food chain since thenew company being floated, Restaurant Brands New Zealand, holds first rightof refusal on the Mexican-style restaurant chain, Taco Bell. Taco Bell is theUSA’s fifth-largest fast-food chain. Restaurant Brands New Zealand is payingPepsiCo NZ$135.5m for the KFC/Pizza Hut operations.

Heinz Wattie sells Tip TopIce Cream

Heinz Wattie announced in April that it had sold its Tip Top Ice Cream divisionfor an undisclosed sum to the diversified Australian food company, Peters and

New Zealand 27


Brownes. Tip Top is New Zealand’s largest ice cream manufacturer, andemploys 600 people in plants in Auckland and Christchurch. The sale comes inresponse to a major restructuring plan announced by the US-based Heinz groupin March that will result in the company closing or selling off over 25 plantsworldwide in order to boost earnings in its main product areas. Ice cream is notone of these main areas, the Tip Top operation is the only such business in theworldwide group. It became part of the Heinz group when Heinz purchased theNew Zealand food company Wattie in 1992.

Signs of rationalisation inthe insurance industry

The New Zealand insurance industry is undergoing further rationalisation. Theinternational insurance company, Prudential, announced in March thepurchase of NZI Life from General Accident for NZ$163.3m. In late AprilPrudential said that the takeover had resulted in the shedding of around 42%of NZI employees and the possibility of closures of some of NZI’s 24 branches.NZI Life will cease to exist as a separate company within the next six months.In another possible rationalisation move, Australian Mutual Provident (AMP)has indicated that it is interested in making acquisitions. Competition in theinsurance industry will intensify if the September referendum agrees to a com-pulsory superannuation scheme.

28 New Zealand


Quarterly indicators and trade data

Quarterly indicators of economic activity

1994 1995 1996 1997

4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr

Exports Qtrly totals

Wool: greasy ’000 tons 61.7 75.4 44.9 36.0 60.8 57.2 41.6 44.6 57.4 32.7a

Butter “ 76.5 66.4 46.3 46.9 73.6 69.4 47.8 58.5 98.6 61.6a

Meat: fresh, frozen

& chilled ” 135.0 216.5 235.8 178.4 145.8 226.4 244.0 167.8 139.0 143.7a

Construction Monthly av

Permits issued NZ$ m 510.6 443.7 418.1 430.7 478.2 525.7 504.2 510.0 533.1 428.5b

Employment End-Qtr

Unemployed ’000 181.09 160.09 156.19 148.86 161.48 146.89 150.19 154.13 169.53 158.22c

Jobs vacant “ 5.8 8.3 5.4 5.5 4.3 5.4 3.9 3.5 2.2 3.5

Retail trade Qtrly av

Sales volume, NZ$ m, 1 Qtr

seasonally adj 1995 prices 9,235 9,220 9,305 9,375 9,378 9,629 9,592 9,555 9,543 n/a

Wages & prices Monthly av

Labour cost index 4 Qtr 1993=100 101.2 101.6 101.9 102.5 103.1 103.6 103.9 104.5 105.1 n/a

Consumer prices: 1990=100 108.5 109.8 110.8 111.0 111.7 112.2 113.0 113.7 114.5 114.2

change year on year % 2.8 4.1 4.5 3.5 2.9 2.2 2.0 2.4 2.5 1.8

Export prices:

wool 1988/89=100 79 78 82 79 76 76 73 71 70 n/a

butter “ 119 114 117 122 136 140 123 118 111 n/a

meat ” 111 108 102 102 106 102 103 110 107 n/a

Share pricesd 1990=100 128 125 133 133 137 136 134 140 150 148

Money End-Qtr

M1, seasonally adj: NZ$ m 29,994 29,921 30,799 31,320 34,050 34,227 34,351 34,006 34,534 33,911c

change year on year % 10.5 10.0 0.1 7.9 13.5 14.4 11.5 8.6 1.4 n/a

Reserve bank discount rate % per year 9.75 10.00 9.90 10.15 9.80 10.05 11.00 10.90 8.80 8.50

Foreign trade

& payments Qtrly totals

Exports fob NZ$ m 5,107 5,403 5,593 4,874 5,070 4,995 5,627 5,027 5,218 3,130a

Imports cif “ 5,878 4,862 5,206 5,581 5,602 5,002 5,167 5,798 5,432 3,102a

Monthly av

Terms of trade Av Jun 1979-

Jun 1989=100 114 114 111 110 113 111 110 110 109 n/a

Exchange holdings End-Qtr

Foreign exchange US$ m 3,561 3,942 3,614 3,887 4,245 4,402 5,295 6,285 5,774 4,467c

Exchange rate

Market rate NZ$:US$ 1.556 1.540 1.494 1.527 1.531 1.474 1.462 1.430 1.416 1.439

Note. Annual figures of most of the series shown above will be found in the Country Profile.a Total for January-February. b Average for January-February. c End-February. d NZSE, Capital index.

Sources: Statistics New Zealand, Key Statistics; OECD, Main Economic Indicators; IMF, International Financial Statistics.

New Zealand 29


Trade with main partners(US$ ’000; monthly averages)

Total importsa Australiab USAb Japanb UKb

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

Exports to New Zealand 1995 1996 1994 1995 1994 1995 1994 1995 1995 1996

Food, drink & tobacco 81,175 87,531 21,112 25,668 6,005 7,179 986 1,123 1,966 2,016

Petroleum & products 56,527 70,702 12,618 16,540 1,166 2,224 99 119 507 51

Chemicals 145,163 150,189 28,997 34,239 19,513 25,174 6,453 6,360 8,737 8,550

Paper & manufactures 30,922 29,607 6,200 6,769 1,518 3,092 2,135 2,132 1,393 1,210

Textile yarn, cloth & mnfrs 60,553c 63,471c 6,773 6,898 3,032 2,885 1,848 1,686 1,931 1,776

Non-metallic mineral mnfrs n/a n/a 4,156 4,895 833 1,019 513 503 1,144 1,129

Iron & steel 19,435 20,783 7,481 7,589 409 770 5,363 5,856 1,545 1,275

Non-ferrous metals 19,960d 17,408d 9,088 11,706 470 647 155 252 547 425

Metal manufactures 28,871 31,561 6,952 8,774 1,645 1,682 808 1,031 1,559 1,430

Machinery incl electric 301,999 316,829 33,226 42,284 39,558 45,371 30,243 32,017 18,439 17,470

Transport equipment 166,572 171,138 24,680 32,678 23,973 17,414 70,110 73,865 8,581 14,643

of which:

road vehicles 126,707 146,946 21,841 26,871 3,470 4,109 68,825 73,531 7,120 8,566

Clothing & footwear 7,461e 8,343e 6,475 6,924 267 312 20 25 521 587

Scientific instruments etc 40,604 44,413 4,457 4,940 4,554 5,466 2,988 3,117 2,037 2,439

Total incl others 1,162,479 1,195,662 218,993 258,627 123,175 137,910 127,931 135,321 57,335 61,405

Total exportsa Australiab Japanb USAb UKb

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec

Imports from New Zealand 1995 1996 1994 1995 1994 1995 1994 1995 1995 1996

Meat & products 145,918 153,169 1,536 1,462 11,863 14,871 40,866 38,735 26,439 31,210

Dairy products 148,921 192,190 5,085 6,065 11,417 13,121 4,610 4,880 18,334 16,353

Fish & products 62,287 61,661 6,538 7,291 14,551 16,171 13,178 15,188 766 885

Fruit, vegetables & products 59,612 63,826 6,785 7,852 19,686 20,007 5,629 7,743 7,166 8,541

Hides & skins, undressed 37,344f 40,666f 22 34 1,349 1,640 262 312 819 1,526

Wood & cork 88,406g 87,755g 14,958 11,367 27,186 29,983 7,376 7,239 83 67

Wool & other animal hair 64,458 58,286 3,076 3,210 4,056 3,935 2,561 3,044 5,145 5,128

Chemicals 100,725h 99,645h 15,885 19,311 18,944 27,396 14,102 12,758 2,166 1,898

Paper & manufactures 25,189 27,206 13,286 15,178 56 81 252 443 23 18

Aluminium & alloys 48,732g 44,471g 3,601 3,573 19,354 28,603 179 314 58i 85i

Machinery & transport eqpt 63,775j 71,436j 26,966 33,984 1,326 1,612 8,873 11,546 7,575 7,720

Total incl others 1,105,126 1,226,168 207,713 222,715 172,332 211,848 128,741 132,997 75,837 82,249

a Figures from New Zealand statistics; domestic exports fob; imports vfd. Commodity totals are the sum of items shown in the trade accountsand may be incomplete. b Figures from partners’ trade accounts, exports fob; imports cif. c Including clothing. d Copper and aluminiumand manufactures. e Footwear only. f Including leather. g Including manufactures. h Including minerals, ores, rubber and manufactures. i Non-ferrous metals. j Excluding transport.

Sources: Statistics New Zealand, Key Statistics; UN, External Trade Statistics, series D; UK HM Customs & Excise, Business Monitor MM20.

30 New Zealand


Direction of trade(US$ m; monthly averages)

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-DecExports 1994 1995 1996 Imports cif 1994 1995 1996

Australia 217.38 235.70 241.94 Australia 213.50 252.26 297.80Japan 156.25 186.86 183.86 USA 191.21 219.22 204.99USA 111.64 115.31 111.56 Japan 152.34 162.52 175.86UK 61.13 69.85 79.57 UK 61.49 68.56 64.26South Korea 48.79 59.39 56.31 Germany 45.25 55.82 57.42Hong Kong 26.77 35.03 38.76 China 32.41 41.38 45.78Taiwan 27.95 33.42 32.45 Taiwan 26.73 30.47 31.25China 28.05 29.01 30.55 Italy 21.79 28.97 30.12Germany 26.11 27.59 28.77 Malaysia 12.06 20.59 23.83Total incl others 1,015.12 1,152.43 1,203.03 Total incl others 994.43 1,171.10 1,228.76Source: OECD, Monthly Statistics of Foreign Trade.

New Zealand 31


Documents

New Zealand · 2007-08-27 · COUNTRY REPORT New Zealand 2nd quarter 1997 The Economist Intelligence Unit 15 Regent Street, London SW1Y 4LR United Kingdom. The Economist Intelligence