New Zealand Economic Outlook for 2016

June 16, 2016 at 5:35 PM

DaltonPlan® Business Information Newsletter
Setting the Benchmark for Business Performance ● Issue 119 - 2016

Deano’s Comment - New Zealand Economic Outlook for 2016

According to information I have gathered from various sources, the Housing industry continues to boom, along with the Construction and Tourism industries.

The Dairying industry is in a spell of despondency and will be for some time until global milk supplies ease.

New Zealand’s meat supply to local and export markets is expected to be reduced due to lower animal numbers, but this should help to support higher prices. (Ref. Meat Industry Association).

Horticulture in New Zealand is the little brother to the major powers of the dairy, meat, forestry and wine sectors but is on track to post impressive yields, and combined with solid prices, is likely to deliver very profitable returns. This is predicted to make a considerable contribution towards offsetting the slump in the primary sector's export earnings caused by the dairy downturn. (Ref. Ministry for Primary Industries).

Forestry prices are being supported by domestic building activity, shipping rates at multi-decade lows, and a favourable NZD.

The Official Cash Rate (OCR) is an interest rate set by the Reserve Bank of New Zealand which defines the wholesale price of borrowed money so it affects the rates that banks charge for borrowing (mortgages, loans, credit cards). The current lower OCR will mean more borrowing at a time when households are already heavily leveraged. The RBNZ is expected to cut the OCR twice more in 2016.

Amidst uncertainty, and considering all current market performance information, economists forecast 2½ - 3% growth over the coming three years. 

 International Outlook 

Prospects are firm in the US, subdued in Europe, modest in Australia, and a lottery in China.

Markets appear to be driven more by liquidity than fundamentals and economists question its sustainability. 

Financial Markets Outlook 

Economists expect the NZD to weaken gradually as the RBNZ eases policy and the USD strengthens.  

What does this all mean to you as a New Zealand business owner?

When working with my clients to develop their annual business plans, we are able to make better-informed decisions by taking into account how various industry sectors in New Zealand are performing, how the behaviour of international markets may affect this balance and what the implications might be of the Reserve Bank’s changes to the OCR.

This type of analysis enables us to recognise opportunities. For example, some of my clients who have been heavily reliant on the success of the dairy industry to enable them to maintain Sales and Profit, have been able to off-set any downturn by prospecting to other industry sectors that are currently in the growth stage of their industry life cycle. This especially applies to clients in the construction industry.

So, find a good source, or a number of different sources, of information to keep yourself up-to-date with current affairs.  I am here to help you to act quickly, performing due diligence, to take advantage of any potential opportunities.

If you have any questions after reading this information, go to Contact Us on our website and type in your request.

By Dean Dalton

Director, DaltonPlan® Business Action Planning Limited

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