New Zealand has one of the highest living standards in the OECD. The New Zealand economy has recorded five years of growth and is set to continue to expand over the coming years. New Zealand has a strong banking sector that weathered the global economic crisis well. It stands out with its health status, social connections as well as civic engagement and governance.
New Zealand is recognized globally as being a safe place to invest and do business. It ranks first in the world for protecting minority investors and ease of starting a business (World Bank, ‘Doing Business’ 2016).
The Heritage Foundation Index of Economic Freedom ranked New Zealand third in 2015, behind Hong Kong and Singapore.
Review of 2015
New Zealand is enjoying a strong, broad-based economic expansion with economic growth tracking around 3% over the past three years. This expansion has been driven mainly by a large increase in the terms of trade (mainly contributed by high dairy prices), the post-2011 earthquake reconstruction in Canterbury and construction activity in Auckland.
Net immigration has increased to record rates of around 1.1% of the total population per year, easing labor-market tensions but exacerbating housing shortages in Auckland. Infrastructure and residential construction activity are growing strongly in Auckland in response to rapid population increases and past shortages and are likely to continue to do so for the next few years.
In per capita terms, increases in real GDP and real gross national income reached almost 2% and 3% respectively in 2014. These rates are higher than in most other OECD countries.
Foreign direct investment is a lever to fuel economic prosperity in New Zealand and is an important contributor to the nation’s prosperity. Particularly where it results in investment into new productive assets and the development of export-focused business ventures. Strong trade relationships and the creation of employment opportunities for the next generation underpin a healthy economy.
During the two-year period from January 2013 to December 2014, the Overseas Investment Office approved approximately US$14.2 billion-worth of applications. The US, Canada, Europe and Australia account for 59% of the total investments followed by China at 14%. Canada is by far the largest investor with approximately 22%.
Unfortunately, no significant or visible investment was made by the Muslim world in New Zealand.
Preview of 2016
Growth of over 3% is expected in the year ahead, supported by net migration inflows, labor income growth, stimulatory interest rates and construction activity. Real GDP growth is expected to moderate as migration inflows ease, construction growth slows and interest rates rise in response to increasing capacity pressures. Government expenditure growth is forecast to remain subdued, exerting a mild constraining influence on demand in most years of the forecast. The high exchange rate remains a headwind for export growth but households will benefit from increased purchasing power.
The Business Growth Agenda: ‘Toward 2025’
Building a more competitive and productive economy for New Zealand is one of the key priorities the prime minister has laid out for this government to achieve. The Business Growth Agenda drives this by ensuring the government stays focused on what matters to business, to encourage confidence and further investment.
The ‘Toward 2025’ Report launched earlier in 2015 marks a full refresh of the governments’ Business Growth Agenda and will be a catalyst to propel New Zealand forward.
Six key inputs that businesses need to succeed and grow have been identified. These are:
- Export markets
- Natural resources, and
- Skills and a safe workplace.
The government is holding itself accountable to the business community and to the public to achieve tangible progress in each of these areas.
New Zealand is fortunate to be in a good place compared to most other countries. We will continue to see a steady performance in the next two to three years underpinned by global demand for quality food, steady growth in net migration and infrastructure spend across New Zealand.
In the medium to long term, the New Zealand government needs an additional US$160-200 billion in foreign investment to meet its target of boosting exports to 40% of GDP by 2025.
Lifting foreign direct investment in all parts of New Zealand by US$5 billion over the next three years is one of the targets released by economic development minister Steven Joyce in an update on the building investment chapter of the government’s Business Growth Agenda.
Other targets include attracting at least 10 new international companies to undertake research and development activity in New Zealand over the next five years and doubling the amount of capital that investor and entrepreneur migrants bring into the country to US$7 billion over three years.
The New Zealand market across the board presents great investment opportunities to the Islamic finance industry, Islamic sovereign funds and individual investors from the Islamic world to explore in the coming year and beyond.