Dairy me, economy looking up

From a precarious looking start, the New Zealand economy has come through 2016 with a rising confidence as revenue and indicators picked up, PaulMcBeth, of BusinessDesk, observes.
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New Zealand’s economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry.
Recent Government data showed the economy humming along, with September gross domestic product up 3.5% from a year earlier.
Construction is the centrepiece with a $37billion pipeline of work estimated for the next six years, largely to meet Auckland’s housing shortfall. At the same time, record migration has contributed to higher household spending, combined with throngs of tourists, both locals and foreigners, travelling the country and spending.
That has helped retailers in an environment where consumers increasingly look online for cheaper deals, and high-profile chains have fallen over this year, including Dick Smith Electronics, Pumpkin Patch and Wild Pair. It’s also got the Government thinking hard about how to get its share of the tax take from online purchases, although it’s only managed to make it to online services with what’s been dubbed the Netflix tax.
«We’re in a pretty good spot, and if you think more broadly, the Government books are looking pretty decent, so if you’re looking from the outside, New Zealand’s not a bad place to be in the end, hence we have got interest from offshore in investing and people wanting to come here,» Nathan Penny, rural economist at ASB Bank, said.
«That growth is still feeding on itself continuing well into next year if not into 2018.»
That’s a far cry from the start of the year when a slump in global dairy prices had people on high alert over whether a slowdown in the rural economy would seep into the urban centres and put the squeeze on the nation’s lenders.
Instead, dairy prices recovered halfway through the year as production in Europe and North America slowed down and ASB is now picking Fonterra Co-operative Group will pay farmers $6.50/kg of milk solids for the current season, past the nominal break-even point and up from $3.50/kg in the 2016 season.
«It’s certainly been a year of two halves — it was pretty tough conditions over the first half and now we’re seeing a lift at last,» Mr Penny said.
«Farms are looking at a season where they will make some money.»
Surprises came thick and fast on the political front, including the unexpected British vote in favour of quitting the European Union, a rising tide of populism that Republican candidate Donald Trump rode on to secure the White House, and capped off with the exit of prime minister John Key.
While the Brexit vote initially sent shock waves through financial markets, including an 11% slump in the British pound to a 30-year low on the day, the reaction to Mr Trump’s victory stoked expectations the US Federal Reserve would finally start hiking interest rates more aggressively, boosting global demand for the greenback and taking some of the pressure off New Zealand’s Reserve Bank, where governor Graeme Wheeler has struggled to offset the deflationary impact of a strong kiwi dollar.
Mr Wheeler has long complained about the strength of the kiwi, over which he has limited control, and had to cut the official cash rate to a record low of 1.75% as inflation remained below his target range of 1%-to-3% for two years.
The rampant property market, centred in Auckland but becoming increasingly widespread, restrained Mr Wheeler’s ability to cut too aggressively for fear of stoking an already inflamed market. Instead, he imposed new lending restrictions on highly leveraged investors to remove them from the market, and has been trying to convince the Government to add a debt-to-income restriction to his toolkit.
Housing has not just been a headache for the Reserve Bank and the Government faces affordability issues of its own. Finance Minister Bill English, who has since taken over as Prime Minister, struggled to make headway with plans to sell state housing stock to non-government departments and private investors, while Environment Minister Nick Smith has continued to face roadblocks in achieving meaningful reform of the Resource Management Act.
Some things have gone their way, such as the passing of Auckland’s unitary plan, and the council reached an accord with central government over paying for its inner-city rail link, and the Crown’s books are in good shape as the swelling population delivers a bigger tax take, even if immigration settings have made some parts of the electorate uncomfortable.
However, politicians have found themselves besieged on several fronts. Tax avoidance by multinationals became a major issue when New Zealand’s foreign trust regime was embroiled in the Panama Papers scandal, though before his exit Mr Key said he was growing increasingly uncomfortable with the rising tide of protectionism, which appears to have scuppered the divisive Trans-Pacific Partnership.
New Zealand also managed to get caught up in a global backlash against Chinese steel imports, which resulted in Fonterra being leaned on, in an unofficial manner, to make it known the introduction of dumping duties would not be welcome. The quality of some imported Chinese steel raised hackles among regulators after several batches used in the Waikato expressway were found to have missed the required standard, and a handful of local manufacturers now face sanctions, ranging from prosecution to a wet bus ticket.
Foreign investment continued to be a bugbear for everyone. Overseas buyers grumbled about the length of time it took to get deals over the line and locals complained about the loss of sovereignty when offshore interests took over New Zealand assets. The Silver Fern Farms deal, where it poured half of its processing assets into a new entity co-owned with Shanghai Maling Aquarius, captured all of those tensions and managed to whet Winston Peters’ appetite to bang the anti-foreign investment drum in Parliament.
On the corporate front, 2016 was less about initial public offerings and more about mergers and acquisitions. Long-time NZX resident Nuplex Industries and one-time stock exchange darling Diligent Corp departed the bourse, Abano Healthcare’s favourite shareholders Peter and Anya Hutson and James Reeves had another go at seizing control of the firm, while Hellaby Holdings looks increasingly likely to be folded into the Bapcor family.
Z Energy got the all-clear from the Commerce Commission to proceed with its purchase of Chevron’s New Zealand network of Caltex stations.
On the other side, the proposed media mergers of Sky Network Television and Vodafone New Zealand, and publishers NZME and Fairfax New Zealand do not seem to have passed the commission’s smell test, and their respective legal teams will have to work overtime to convince the regulator the deals pass muster and would be good for the country.
The usual corporate spats broke out. Briscoe Group and Kathmandu Holdings are set to go to court over who should foot the bill for certain costs when the homeware and sporting goods chain mounted a takeover for Kathmandu. Spark and its former subsidiary Chorus launched a war of words about the adequacy of copper-based broadband.
A cloud of suppression was lifted on Ngatata Love and the former Treaty negotiator was jailed for defrauding the Wellington Tenths Trust, an entity he chaired, taking backhanders for doling out property contracts. In other high-profile cases, former Milford Asset Management high-flier Mark Warminger stood trial accused of manipulating stock prices, though the learned judge has yet to deliver his decision.While 2016 was the year in which the rising tide of homelessness and poverty attracted the public’s attention, it was also a year where the mega-rich continued to get richer. That did not extend to media-shy billionaire Graeme Hart, who again topped the National Business Review’s rich list but saw his wealth shrink for the first time since 2012, to an estimated $7billion. Mr Hart whittled down his Reynolds packaging empire to repay debt used to fund the global expansion, while his UCI autoparts business was a rare mis-step, filing for bankruptcy protection to restructure the business.
 
Source: ODT
Link: https://www.odt.co.nz/business/dairy-me-economy-looking
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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