Archive | Trade

Tripartite economic summit opens in Guangzhou

Auckland mayor Phil Goff leads a group of 97 delegates representing 70 Auckland businesses taking part in the third Tripartite Economic Alliance summit which opens today in Guangzhou, China.

2 councillors, finance & performance committee chair Ross Clow and planning committee chair Chris Darby, are also in the delegation.

Mr Goff said before leaving for China: “This will be Auckland’s largest ever trade delegation. Businesses clearly see the advantage of interacting with our 2 sister cities at the summit. Each are gateway cities to 2 of the most important & powerful economies in the world.”

The Guangzhou summit is the last of 3, which started in Los Angeles in 2015 and continued in Auckland last year. However, the 3 city councils have agreed to extend the special relationship for another 3 years with opportunities for interaction between them outside the formal summit process.

The Guangzhou summit runs for 3 days, allowing Auckland businesses to generate partnership & investment opportunities with counterparts from Los Angeles & Guangzhou, and for Auckland to showcase the city as a destination for investment & tourism.

Mr Goff said: “Auckland is New Zealand’s international city and represents 38% of the country’s gdp. As our city grows, investment & business partnerships become increasingly important to it & New Zealand’s future.

“Guangzhou & Los Angeles are global economic powerhouses, as well as a major source of migrants, students & tourists. The formal partnership between our cities creates opportunities for us to facilitate the continued growth of local businesses & our economy.

“The summits provide real economic value & jobs to Auckland, with deals ranging from hundreds of thousands to millions of dollars sealed as a result of the past 2 events.

“For Auckland, those agreements mean more jobs, business expansion, talent coming to our city, and New Zealand innovation & expertise finding new opportunities offshore.”

Mr Goff said the Bank of NZ, Huawei Technologies Co Ltd and NZ Trade & Enterprise were supporting Auckland’s delegation to the summit this year, which had enabled about half the cost of Auckland’s delegation budget to be met by the private sector.

One point of interest for Mr Goff is the Haizhu electric tram: “We are working with government to bring light rail to Auckland as quickly as possible. It’s a good chance to learn from the success of other light rail systems around the world and consider what is the best system for Auckland.”

Link: Summit & tripartite economic alliance

Attribution: Mayoral release.

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Old athletes & Lions drive NZ to slimmer deficit

Statistics NZ said yesterday a record high $1.3 billion services surplus and a smaller primary income deficit narrowed New Zealand’s current account deficit to $1.6 billion in the June quarter.

More economic statistics are due out this morning: the GDP figures and the monthly migration figures.

Statistics NZ said New Zealand exported a record $5.8 billion of services in the June quarter, seasonally adjusted, while importing a record $4.5 billion of services.

The increase in services exports was driven by $3.7 billion of spending by overseas travellers in New Zealand (exports of travel services): “This is the largest ever seasonally adjusted export of travel services. Part of this increase was due to the World Masters Games in April, and the British & Irish Lions Rugby tour to New Zealand in the June & September quarters.”

Overall, the seasonally adjusted goods & services balance in the June quarter was an $834 million surplus.

Stronger goods exports reduced the seasonally adjusted goods deficit for the quarter to $446 million, down from $1.1 million in the March quarter.

Statistic comparisons

  • For the year ended June 2017, New Zealand’s current account deficit was $7.5 billion (2.8% of gdp; it was 2.7% of gdp for the June 2016 year)
  • The seasonally adjusted current account balance was a $1.598 billion deficit in the June quarter ($1.187 billion smaller than the March 2017 quarter’s deficit)
  • The goods deficit decreased $677 million to reach $446 million
  • The services surplus increased $295 million to reach $1.280 billion, the highest on record
  • New Zealand’s primary income deficit decreased to $1.910 million in the June quarter, $403 million smaller than in the March 2017 quarter
  • New Zealand’s secondary income deficit increased to $522 million in the June quarter, $188 million larger than the March 2017 quarter deficit
  • The capital account balance was a deficit of $14 million for the June quarter, down from the surplus of $3 million in the March quarter
  • The financial account net inflow was $110 million for the June quarter, an increase from the revised financial account net outflow of $787 million for the March quarter
  • New Zealand’s net international liability position was $154.2 billion (57.5% of gdp) at 30 June, up from a revised $153.0 billion at 31 March but down slightly as a percentage of gdp (57.8%)
  • New Zealand’s net external debt position was $145.5 billion (54.3% of gdp) at 30 June, up from a revised net external debt position of $144.4 billion (54.6% of gdp) at 31 March
  • The outstanding reinsurance balance for the Canterbury earthquakes is $1.3 billion while the outstanding balance for the Kaikoura earthquakes is $991 million. Revisions to recognised reinsurance claims for the Canterbury & Kaikoura earthquakes are reported in the quarter when the earthquakes occurred.

Attribution: Statistics NZ release.

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Maiden flight over Shanghai portends new trade shifts

A week after being installed as US president in January, Donald Trump ordered a review of 2 aircraft purchases – fighter jets from Lockheed Martin Corp and Air Force 1 presidential aircraft.

The price of the Lockheed F-35s has dropped – probably wisely given a Bloomberg report that Mr Trump preferred a Boeing competitor – and Mr Trump appears to be getting along fine with Boeing.

Both companies fit into Mr Trump’s ‘Make America great again’ & ‘Buy American’ campaigns. Still, he & his country might like to consider a newcomer to aircraft manufacturer, at least for passenger planes: the great currency manipulator, China.

State-owned Comac (the Commercial Aircraft Corp of China Ltd) gave its C919 short-medium-range commercial trunk airliner its maiden flight over Shanghai on Friday. The plane’s all-economy-class layout has 168 seats, hybrid class 156 seats, with a single aisle. The basic version is designed to cover a range of 4075km, the enhanced version 5555km.

Comac has designed the C919 as a direct competitor for Boeing’s 737 and the European Airbus A320. The one other potential competitor, Mitsubishi Aircraft Corp of Japan, said in January it had pushed first delivery back from mid-2018 to mid-2020 for its much smaller (78- & 92-seat versions) MRJ (Mitsubishi regional jet).

I happen to think the US has been a far greater currency manipulator for far longer than China, and that it’s also been a trade bully since the time of the Boston tea party in 1773. Neither of the Asian aircraft developments had anything to do with Mr Trump in their evolution, starting well before his elevation, but the trade-pressuring president might like the price tag of the C919, put at $US50 million – under half the price of the Boeing 737 or Airbus A320.

That’s especially so if the US Federal Reserve starts to raise its funds rate, which would have an immediate, sharp impact on US Government debt.

China is also looking at African nations as buyers of its new aircraft which, in economic relationship terms, would raise the profile of the China-sponsored Brics (Brazil, Russia, India, China & South Africa). And it would naturally look to Asia for buyers.

It’s the kind of economic event that carries far greater weight than tough political talk because it offers a concrete alternative for trade, leads to more value-creating innovation & research and – whether wall builders like it or not – advances trade and spreads wealth.

It’s akin to a sister venture of the revived Silk Road across Asia to Europe and the new Maritime Silk Route, which will run around to several new Chinese-financed ports & rail links along the north-eastern African coast, portending greater international networks.

BBC, 5 May 2017: China’s first big passenger plane takes off for maiden flight
Bloomberg, 17 February 2017: How close to Trump is too close for Boeing?
Bloomberg, 27 January 2017: Trump’s Pentagon chief orders F-35 jet, Air Force 1 review
Bloomberg, 20 October 2014: Mitsubishi Aircraft unveils Japan’s first passenger jet
Comac, C919
Mitsubishi, 23 January 2017: MRJ’s latest development status

Earlier stories:
1 May 2016: Propbd economic update Sun1May16 – Rethinking boundaries, Silk Road unity
World property T2Jun15 – Stepping stones across Central Asia

Attribution: Company website, BBC, Bloomberg, Mitsubishi.

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Prime ministers vow to continue with TPP and toward single market

New Zealand & Australian prime ministers Bill English & Malcolm Turnbull confirmed in a joint statement on Friday that they’d work together to progress the TPP (Trans Pacific Partnership) agreement with other TPP members following the US withdrawal.

They also signed an agreement to better integrate Australia & New Zealand’s science, research & innovation agendas by enabling collaboration between researchers & innovative companies on both sides of the Tasman.

And they committed to continue finding ways to make it easier to operate across the transTasman market, and for the 2 countries to continue aiming for a single economic market.

Joint statement – leaders meeting 17 February 2017

Attribution: Government release.

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NZ debt position continues to worsen

New Zealand’s net international liability position has worsened in all of the last 5 quarters, rising from $149.4 billion in June 2015 to $166.2 billion (64.9% of gdp) in the September 2016 quarter. The figures out from Statistics NZ yesterday show 3 steps of about $4 billion and, in the latest quarter, another step up of $3.2 billion from a revised $163 billion (64.4% of gdp) in June.

The value of liabilities increased by $2.5 billion in the latest quarter while the value of assets decreased by $710 million.

Statistics NZ’s international statistics senior manager, Jason Attewell, said yesterday the seasonally adjusted current account deficit increased from $1.8 billion to $1.9 billion in the September quarter, a result of more spent on imports, $686 million less earned from exports, a shortfall which was funded by the banking sector.

Meat (New Zealand’s second largest export commodity) led the fall in export goods, down $235 million. Fruit exports also fell, dairy showed little change, logs & timber exports rose by $43 million.

Mr Attewell said New Zealand’s offshore investments earned less income, the main factor driving a $71 million increase in the investment income deficit, and foreign tourists spent less in New Zealand, leading to a $16 million fall in the services surplus.

The annual current account deficit was $7.5 billion (2.9% of gdp) for the September year, down from $8.5 billion (or 3.5% of gdp) for the previous 12 months.

Balance of payments and international investment position: September 2016 quarter

Attribution: Statistics NZ tables & release.

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Propbd on Q F5Feb16 – Cruise trade, Lyttelton wharf reopens

Cruise ship based in Auckland for 5 months
Lyttelton port rebuild opens

Cruise ship based in Auckland for 5 months

P&O Cruises, a division of international cruise operator Carnival Corp & plc, will base the 1800-passenger Pacific Pearl in Auckland through to 23 June.

The liner arrived yesterday with nearly 1000 Australians on board, many of them signed up for a special cruise package which included 4 nights in Auckland and access to the rugby league Nines at Eden Park.

Carnival Australia & NZ executive chair Ann Sherry, said the Pacific Pearl would go on an unparalleled 20 cruises over the next 5 months – double the number last year – generating up to $20 million in economic value for New Zealand.

The Pacific Pearl’s schedule includes 2 voyages between Auckland & Sydney. Its 18 round-trip cruises will take it to 11 New Zealand ports.

Ateed (Auckland Tourism, Events & Economic Development) chief executive Brett O’Riley said Auckland’s record cruise season was estimated to deliver $251.7 million to the region.

Lyttelton port rebuild opens

Deputy Prime Minister Bill English and Earthquake Recovery Minister Gerry Brownlee missed the excitement of shaking hands with dignitaries signing the Trans Pacific Partnership Agreement at SkyCity in Auckland yesterday, and an insight helped by TPPA protesters into what a completely pedestrianised central area might look like.

Instead, the 2 southern ministers headed to Lyttelton to open an $85 million port expansion, the Cashin Quay 2 Wharf. The rebuild of a wharf destroyed in the 2011 earthquake turned into a 10ha reclamation, using over a million tonnes of rubble from central Christchurch.

Mr Brownlee said the port lost 30% of its operational space in the 2010-11 quakes and had to repair 14ha of container terminal.

Attribution: Company & ministerial releases.

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Propbd on Q W16Dec15 – economy: Economists study Auckland housing, dairy

Bank economists delve in Auckland’s living spaces
Reserve Bank examines severity of dairy decline

Bank economists delve in Auckland’s living spaces

ASB Bank’s economists drilled into housing statistics in a report they released yesterday, highlighting the intensity to which Auckland’s housing stock is being used, and the region’s different preferences & circumstances.

The Home economics report was prepared by bank economist Kim Mundy: “In this paper we have drilled into the detailed composition of Auckland’s households. We have made some observations and discussed some of the potential reasons for the differences we have noticed. At the very least, we can conclude that Auckland’s housing stock has been used with a greater intensity than elsewhere, and that this utilisation has increased over time. The next step will be to see if we can econometrically account for some of the differences and, in doing so, gain some insights into the extent of Auckland’s housing shortage.”
First observations were that, in 2013, relative to the rest of the New Zealand Auckland had:

  • fewer empty/unoccupied houses
  • more people living in each house
  • more households with 2 or more families in one house (over half of the country’s total)
  • faster growth in the number of households with 3 or more people (especially households with more than 6 people), and
  • within Auckland, wards with lower median household income tend to have more people/house.

Link: Home economics report

Reserve Bank examines severity of dairy decline

A paper jointly published yesterday by the Reserve Bank & DairyNZ elaborates on the state of indebtedness of the dairy sector.

The paper’s authors – Ashley Dunstan, Hayden Skilling from the bank, Matthew Newman & Zach Mounsey from Dairy NZ – said: “Dairy sector debt increased from $11.3 billion to $29 billion between 2003-09 due to rapid increases in land prices, a flurry of dairy conversions and significant on-farm investment. This rise in debt left highly leveraged farmers exposed when milk & land prices fell sharply in 2009. A swift recovery in global milk prices subsequently helped to limit the degree of financial stress, although nonperforming loans increased to a peak of around 4% of sectoral debt.

“This experience has resulted in increased caution among dairy farmers and a slower rate of debt accumulation. However, debt levels remain at elevated levels of more than 300% of trend milk income. As at June 2015, dairy debt reached $37.9 billion, representing around 10% of total bank lending. Developments in the dairy sector are therefore an important consideration in assessing financial system risks.”

The authors said global dairy prices fell by more than 65% in $US terms between February 2014 & August 2015, due to increased global supply, sanctions on Russian imports and reduced Chinese demand following a build-up of inventories during the 2013-14 season. Over this period, the exchange rate depreciated, dampening the fall in $NZ terms. Dairy prices have since increased from August lows, but recent outturns have not been favourable and prices remain well below their long-term average.

“As a result of sustained lower milk prices, dairy farmers are currently facing significant cashflow pressures. Following a record 2013-14 season, Fonterra’s payout fell considerably and farmers are now expected to face consecutive sub-$5/kg of milk solids payouts. The impact of the low payouts is amplified by an increase in average break-even payouts since the 2006-07 season, reflecting increases in debt levels and a shift to more cost-intensive operating structures.

“The worst cashflow pressures are expected to emerge in the current season (2015-16), compounded by low retrospective payments from the 2014-15 season. The cashflow shortfall for the average dairy farmer is estimated to be more than $1/kgMS (based on DairyNZ forecasts of $4.15 for effective milk revenue, taking into account the latest Fonterra forecast for the headline payout).”

Despite the cashflow pressures, the authors said dairy farm land values had been supported by low interest rates and a largely positive long-term outlook for the payout. The Real Estate Institute’s dairy price index continued to grow at about 10%/year throughout the summer of 2014-15. However, land values had recently shown signs of weakening, on limited sales volumes.

“There is a risk that land values could fall if cashflow pressures persist, especially if confidence in the longer-term milk price outlook deteriorates. Downward price movements could be amplified by reduced liquidity in the farm market, if demand to purchase farms falls alongside the increased risk of rising stressed sales. The extent of financial system losses in this scenario hinges critically on how debt is distributed within the dairy sector.”

Link: Reserve Bank Bulletin

Attribution: Bank releases.

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NZ formalises stake in Asian infrastructure bank

New Zealand has formally became a member of the Asian Infrastructure Investment Bank.

Finance Minister Bill English said this week members providing half the bank’s capital needed to ratify its establishment, and that should be completed this month. The bank would start operating in January

“New Zealand was the first developed western nation to join negotiations to set up the bank, and our membership will enhance our already strong economic, trade & investment links with the Asian region.

“Through our role in establishing the bank, we have been able to ensure it has strong governance, environmental & social policies, and transparency – so we have good reason to expect it to deliver efficiently & effectively.

“New Zealand is benefiting from the rapid & sustained economic development across Asia. For this to continue, the region needs to address constraints posed by infrastructure bottlenecks.”

The bank will have initial capital of about $NZ150 billion to promote sustainable development in the region.

Attribution: Ministerial release.

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New visa to keep NZ competitive in international student market

Tertiary Education, Skills & Employment Minister Steven Joyce and Immigration Minister Michael Woodhouse announced a new student visa on Friday, saying it was designed to make New Zealand more competitive for retaining & attracting top international students.

Their release indicated it was introduced to catch up with competing countries which had moved ahead of New Zealand.

The ministers said: “The pathway student visa will allow international students to undertake a pathway of up to 3 consecutive programmes of study with selected education providers. A pathway can be offered by a single education provider or in partnership with other selected education providers. They will be valid for a maximum of 5 years.”

An 18-month pilot programme will start on 7 December, covering 500 primary, secondary & tertiary institutions.

Figures released this month showed the number of international students studying in New Zealand on a student visa went up by 16% in the 2014-15 financial year to 84,856.

Mr Joyce said: “The industry & Government believe pathway student visas will help retain more international students and make New Zealand more competitive with countries such as Australia which already offer pathway programmes.

“The international education industry is already worth $2.85 billion in foreign exchange each year and pathway student visas are an important initiative that will help us in our goal to double the value of international education to New Zealand by 2025.”

Attribution: Ministerial release.

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Propbd on Q T27Oct15 – Fletcher wins whole convention centre job, Metlife says no to Manukau golfcourse, 2 Goodman sales, tourist spendup

Fletcher wins convention centre & hotel contract
Metlifecare turns down Manukau golfcourse opportunity
Goodman sells 2 Addington buildings
Foreign tourists spend $1.7 billion more

Fletcher wins convention centre & hotel contract

SkyCity Entertainment Group Ltd has appointed The Fletcher Construction Co Ltd to build the NZ International Convention Centre & a 5-star hotel beside it, on the Hobson-Nelson Sts block in Auckland (pictured).

SkyCity chief executive Nigel Morrison said today the company had agreed the terms of a binding $477 million contract with Fletcher Construction Company Ltd to build & complete the design of the centre & 1327 parking spaces under it, the 5-star 300-room Hobson St hotel and the retail laneway linking the 2 streets.

He said the parties were confident work could begin by Christmas.

Metlifecare turns down Manukau golfcourse opportunity

Metlifecare Ltd has decided against buying a 5.5ha site on the Manukau golfcourse from Fletcher Residential Ltd for a retirement village.

Chief executive Alan Edwards told Metlifecare’s annual meeting today: “After an extensive review, the company has determined that the proposed project did not meet Metlifecare’s key risk/return thresholds & capital allocation criteria.”

He said the company was still progressing its due diligence investigations into the 3ha site in McClymonts Rd, Albany, and its resource consent for 5ha at the Peninsula golfcourse, Red Beach.

“Investigations continue on possible acquisitions of other sites in the targeted areas, primarily Auckland, Bay of Plenty & Hamilton,” he said.

Goodman sells 2 Addington buildings

The Goodman Property Trust has sold 2 Christchurch buildings as part of its asset recycling programme. Local investors have bought the amenity & IAG buildings at 12 & 14 Show Place in Addington for $33.2 million. Settlement is scheduled for 25 November.

Trust manager Goodman (NZ) Ltd’s chief financial officer, Andy Eakin, said today: “Ongoing asset sales are currently the preferred source of funding for new development activity. It’s a successful & sustainable approach that is improving the cash earnings of the trust while enhancing an already high quality property portfolio.”

Earlier story:
28 August 2015: Goodman puts 5 Christchurch buildings on market

Foreign tourists spend $1.7 billion more

Statistics NZ said today continued growth in visitor numbers from Asia & North America contributed to a record $1.7 billion increase in international tourist spending in the year to March.

2.95 million overseas visitors came to New Zealand in the March year. 6 months on, annual arrivals had topped 3 million.
The number of international visitors rose 7.1% and they spent 17.1% more – $11.8 billion – in the March year after a 4.5% increase the previous year.

Statistics NZ’s Tourism satellite account 2015 showed domestic tourism spending up 6.3% to $18.1 billion and the total up 10.3% to $29.8 billion, following a 4% increase the previous year.

Link: Tourism satellite account

Attribution: Company releases, Statistics NZ.

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