Reliance on Commodity Exports and Elevated NZD Highlight Industry Headwinds

The Bloomberg Correlation-Weighted Index shows that the NZD has appreciated by 3.56% over the past year, sustained by New Zealand’s economy outperforming many other advanced economies. The rising currency is providing benefits to some sectors to the economy, while posing challenges to other sectors. The high NZD is having the most effect pushing agricultural commodity […]

Will the Rugby World Cup Help NZ Sustain its Growth Momentum?

Tourism is integral to New Zealand’s economy in the production of goods and services and the creation of employment opportunities. With a yearly average of 2.4 million visitor arrivals, the tourism industry is the country’s biggest export earner. In the year ended March 2010, international tourist expenditures comprised NZ$9.5 billion (18.2% of total export earnings) […]

Will Emerging Asia Continue to Fuel New Zealand’s Recovery?

Record high commodity prices are supporting the economy as it recovers from a swath of deadly earthquakes to strike New Zealand in 80 years. Even while New Zealand’s currency has appreciated around 18% against the USD this year, emerging market (EM) demand for commodities (logs, dairy, and meat) continues to soar, which is benefiting New […]

What Is Sparking New Zealand’s Housing Revival?

Migration and housing shortages will add pressures to housing supply that will outpace demand, leading to a rise in New Zealand property prices. According to realestate.co.nz, the average asking price for house rose to NZ$429,000 in April, its highest level in four years and just surpassing the previous market high point in October 2007. Meanwhile in March 2011, the REINZ median house price reached a record high of NZ$365,000 from NZ$350,000 in February. The housing shortages brought about by the Christchurch earthquakes along with low numbers of houses built in recent years affords a platform for a housing market revival. While higher priced properties in Auckland saw increased activity and prices, Christchurch and outer areas of large cities experienced flat to falling prices.

Russia and New Zealand Will Soon Engage in Formal Free Trade Discussions

It seems fitting that New Zealand, the world’s largest dairy exporter, and Russia, the world’s 5th largest food importer, would discuss the possibility of engaging in a Free Trade Agreement. After nearly a decade of flirting with the idea, New Zealand’s Trade Minister Tim Groser stated on June 1 that the two countries will begin formal discussions in the upcoming months.

Fine-Tuning Australian Monetary Policy

The Reserve Bank of Australia’s (RBA) recent move to raise its overnight lending rate to 3.25%—the first rate hike in a G20 country in the aftermath of the financial crisis—came earlier than many onlookers would have predicted weeks or months beforehand. But the move wasn’t inconsistent with economic fundamentals.  Resilient commodity demand from emerging markets […]

Will China Control the World’s Rare Metals?

Is China building a rare metals cartel equivalent to OPEC?  Analysts began contemplating this possibility last month when a draft report by the Chinese government surfaced stating that China planned to ban the export of rare earth minerals.  Last week, Chinese officials stepped back from this claim and said they were only planning to reduce export quotas of rare metals to 35,000 tons per year from 53,000 tons in 2008.  World demand is currently over 110,000 tons and expected to grow to 188,000 tons by 2012, according to the U.S. Geological Survey (USGS).  Since China is responsible for 97% of the world’s current rare metals production, fears have developed that global green technology will be held hostage since hybrid cars, cell phones and wind turbines all require rare metals.  Moreover, the number of uses of these metals keeps rising.

To further compound the suspicion that China wants to control the world’s supply of rare metals, China has recently signed deals to buy large stakes in two Australian rare metals mines that could start production within one to two years.  It is estimated that these two Australian mines could have a combined production of 25% of current global output, according to the World Business Council for Sustainable Development. Additionally, China tried—unsuccessfully—to buy the U.S. Mountain Pass mine on two occasions.