New Zealand, looking ahead not back
This is not the first time we have covered New Zealand on the forum as it is fast becoming one of the more popular expat destinations as it emerges from the shadows of local rivals such as Australia. However, while many people have looked at New Zealand as a potential destination to start a new life, very few will be away of how strong the New Zealand economy is at the moment and the prospects for the country as a whole.
While there are many issues to consider when looking at New Zealand, the economy is by far and away the most important because ultimately if there is no employment for those moving to New Zealand they will have nothing to live on.
The New Zealand economy
In line with the vast majority of countries around the world, the New Zealand economy began to fall back in 2007 as the ongoing issue of the credit crunch began to hit home with more and more people suffering financial ruin. The sudden drop-off in economic activity in New Zealand led to what was the worst recession seen in the country in 30 years and it has to be said that many people were concerned about the short to medium term plight of New Zealand itself. However, these very people will be surprised to learn that the economy is now fighting fit and looking to the future!
The third quarter of 2009 saw GDP (Gross Domestic Product) increase by 0.1% which was the first growth in the economy since 2007 when the credit crunch began. While many economists are obviously concerned about the longer term impact of the country’s worst recession in 30 years there is no doubt that progress has been made and the New Zealand economy is forecast to show further growth in the short to medium term.
The New Zealand services sector
When you consider that the New Zealand services sector makes up around 70% of GDP in the economy, it is obviously a vital area of business and one which needs to be nurtured and brought back to life. Thankfully, figures released by the New Zealand government in September confirmed that the services sector had in fact grown for the third month in a row with hopes that this would continue in the short to medium term at least.
The performance of the services index, issued by the Bank of New Zealand, confirmed renewed optimism in the services sector with the figure rising from 51.3 to 53.2, with a figure over 50 indicating improvements in the area of retail, property and health. Overall there is renewed optimism in the New Zealand economy, something which is being reflected in the currency markets.
The currency markets
When you consider the sudden and very sharp improvement in the New Zealand economy, with experts forecasting economic growth of 2.3% in 2010, it will be no surprise to learn that the New Zealand currency has been very strong of late. Indeed the currency has registered a gain of 30% against the US dollar over the last six months, an issue which is starting to concern people because of the obvious impact upon exports. When you also consider that New Zealand still has a significant export sector it is easy to see where the concerns about the medium term are starting to come in.
On the flip side, despite the fact that the currency is very strong at the moment there are concerns about retail sales in the country which have recovered significantly in the short term. Indeed the latest figures available in August showed a 1.1% year-on-year increase in adjusted retail sales in New Zealand amid concerns that the economy could push too far in the short term with the potential to overheat. This has driven many experts to forecast an increase in New Zealand interest rates in the early part of 2010, despite the New Zealand authorities suggesting it will be late in 2010 before any interest rate movements occur.
Obviously, when you consider the relatively low interest rates in other parts of the world such as America and the UK, a further increase in New Zealand interest rates may strangle consumer finance but it will make the local currency more attractive to overseas investors. This will again impact upon exports levels, leaving the New Zealand authorities with a very tricky situation which will require impeccable timing.
New Zealand immigration
The New Zealand economy is currently one of the strongest in the world at the moment having left the recession earlier this year and set to expand impressively in 2010. As a consequence, immigration growth in New Zealand has touched a five-year high as employment prospects continue to improve and more and more people look towards the country for their future.
Not only will an increase in net immigration allow New Zealand businesses to fill various employment vacancies but it will also inject more capital into the economy as the vast majority of those moving to New Zealand will already have money to spend. All in all it looks as though the New Zealand economy is on the up and up although as we touched on above, there is a need for the authorities to retaining tight control of immigration, consumer spending and the currency.
Prospects for New Zealand
New Zealand is coming more a more into the limelight of the international expat market and attracting a growing number of visitors from foreign lands. Many of these have now decided to remain in the country on a permanent basis which is feeding the national economy and boosting the short term recovery.
Conclusion
New Zealand is a country which is becoming more and more popular and has an economy which has rebounded very strongly from the worst recession seen in 30 years. However, as we mentioned above, while employment prospects are improving there is a need for the authorities to ensure the economy does not overheat and push ahead too far too quickly. On the other hand they need to maintain control of the currency markets because any further strength in the New Zealand dollar will obviously impact upon exports and business levels as a whole.
The New Zealand economy is performing far better than the vast majority of economies around the world but there is a note of caution at the speed of recovery.
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