Post on 07-Apr-2018
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GLOBAL BUSINESS FINANCE
CIA-II
COMPARISION OF NEW ZEALANDSS ECONOMY IN 1975
WITH 2010 BASED ON MACRO ECONOMIC VARIABLES
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NEW ZEALAND ECONOMY
New Zealand's economy has traditionally been based on a foundation of exports from its
very efficient agricultural system. Leading agricultural exports include meat, dairy
products, forest products, fruit and vegetables, fish, and wool. New Zealand was a direct beneficiary of many of the reforms achieved under the Uruguay Round of trade
negotiations, with agriculture in general and the dairy sector in particular enjoying many
new trade opportunities. The country has substantial hydroelectric power and sizable
reserves of natural gas. Leading manufacturing sectors are food processing, metal
fabrication, and wood and paper products.
Since 1984, government subsidies including for agriculture have been eliminated; import
regulations have been liberalized; exchange rates have been freely floated; controls on
interest rates, wages, and prices have been removed; and marginal rates of taxationreduced. Tight monetary policy and major efforts to reduce the government budget deficit
brought the inflation rate down from an annual rate of more than 18% in 1987. The
restructuring and sale of government-owned enterprises in the 1990s reduced
government's role in the economy and permitted the retirement of some public debt.
Economic growth, which had slowed in 1997 and 1998 due to the negative effects of the
Asian financial crisis and two successive years of drought, rebounded in 1999. A low
New Zealand dollar, favorable weather, and high commodity prices have boosted exports,
and the economy is estimated to have grown by 2.5% in 2000. Growth is likely to slow in
2001 given the economic slowdown in important export markets. The return of
substantial economic growth led the unemployment rate to drop from 7.8% in 1999 to
5.2% in mid-2001, the lowest rate in 13 years.
The large current account deficit, which stood at more than 8% of GDP in 2000, has been
a constant source of concern for New Zealand policymakers. The rebound in the export
sector is expected to help narrow the deficit to lower levels.
New Zealand's economy has been helped by strong economic relations with Australia.Australia and New Zealand are partners in "Closer Economic Relations" (CER), which
allows for free trade in goods and most services. Since 1990, CER has created a single
market of more than 22 million people, and this has provided new opportunities for New
Zealand exporters. Australia is now the destination of 19% of New Zealand's exports,
compared to 14% in 1983. Both sides also have agreed to consider extending CER to
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product standardization and taxation policy. New Zealand initialed a free trade agreement
with Singapore in September 2000 and is seeking other bilateral/regional trade
agreements in the Pacific area.
U.S. goods and services have been competitive in New Zealand, though the strong U.S.dollar has created challenges for U.S. exporters in 2001. The market-led economy offers
many opportunities for U.S. exporters and investors. Investment opportunities exist in
chemicals, food preparation, finance, tourism, and forest products, as well as in
franchising. The best sales prospects are for medical equipment, information technology,
and general consumer goods. On the agricultural side, the best prospects are for fresh
fruit, snack foods, specialized grocery items such as organic foods, and soybean meal.
New Zealand welcomes and encourages foreign investment without discrimination. The
Overseas Investment Commission (OIC) must give consent to foreign investments thatwould control 25% of more of businesses or property worth more than NZ$50 million.
Restrictions and approval requirements also apply to certain investments in land and in
the commercial fishing industry. In practice, OIC approval requirements have not been an
obstacle for U.S. investors. OIC consent is based on a national interest determination, but
no performance requirements are attached to foreign direct investment after consent is
given. Full remittance of profits and capital is permitted through normal banking
channels.
A number of U.S. companies have subsidiary branches in New Zealand. Many operatethrough local agents, and some are in association in joint ventures. The American
Chamber of Commerce is active in New Zealand, with its main office in Auckland and a
branch committee in Wellington.
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GDP (Gross Domestic Product)
the gross domestic product (GDP) or gross domestic income (GDI) is one of the measures
of national income and output for a given country's economy. GDP can be defined in
three ways, all of which are conceptually identical. First, it is equal to the total
expenditures for all final goods and services produced within the country in a stipulated
period of time (usually a 365-day year). Second, it is equal to the sum of the value added
at every stage of production (the intermediate stages) by all the industries within a
country, plus taxes less subsidies on products, in the period.
New Zealand Gross Domestic Product is worth 125 billion dollars or 0.20% of the world
economy, according to the World Bank. From 1960 until 2009, New Zealand's average
Gross Domestic Product was 39.48 billion dollars reaching an historical high of 134.68billion dollars in December of 2007 and a record low of 5.18 billion dollars in December
of 1968. Over the past 20 years the government has transformed New Zealand from an
agrarian economy dependent on concessionary British market access to a more
industrialized, free market economy that can compete globally. This dynamic growth has
boosted real incomes - but left behind some at the bottom of the ladder - and broadened
and deepened the technological capabilities of the industrial sector.
Ye
ar
Gross Domestic
Product
(NZ$ millions)
1 US dollar
exchange
Inflationindex
(2000=100
)
Per capitaincome
(as % of
USA)
19
8022,976 NZD 1.02 30 58.67
19
8545,003 NZD 2.00 53 38.93
19
9073,745 NZD 1.67 84 55.80
20
00114,563 NZD 2.18 100 38.98
20 154,108 NZD 1.41 113 62.99
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05
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INVESTMENT
New Zealand's net international liabilities were $161.0 billion, or 85.9 percent of GDP
compared with 90.7 percent at 31 March 2009.New Zealand's foreign currency
denominated external debt was $116.4 billion, of which 93.3 percent was hedged.
New Zealand investment abroad of $127.6 billion was mostly in Australia and the United
States
68.4 percent of the $288.6 billion of foreign investment in New Zealand was from
Australia, the United Kingdom, and the United States.
The value of investment from Japan and the United States was $9.4 billion lower than at
31 March 2009.
Australian investment in New Zealand reached $100.0 billion for the first time.
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Inflation
The inflation rate in New Zealand was last reported at 4.5 percent in the first quarter of 2011.
From 1915 until 2010, the average inflation rate in New Zealand was 4.67 percent reaching an
historical high of 44.00 percent in September of 1918 and a record low of -100.00 percent in June
of 1915. Inflation rate refers to a general rise in prices measured against a standard level of
purchasing power. The most well known measures of Inflation are the CPI which measures
consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic
economy. This page includes: New Zealand Inflation Rate chart, historical data and news.
A basket of goods and servicesthat cost $1.00in quarter 4 of
1975would have cost $8.21in quarter 4 of 2010
Total percentage change 721.4%
Number of years difference 35.00
Compound average annual rate 6.2%
Decline in purchasing power 87.8%
Index value for 1975 quarter 4 is 138.4
Index value for 2010 quarter 4 is 1137.0
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Imports
n import is any good or service brought into one country from another country in a legitimate
fashion, typically for use in trade. Import goods or services are provided to domestic consumers
by foreign producers. An import in the receiving country is an export to the sending country.
Imports, along with exports, form the basis of international trade. Import of goods normally
requires involvement of the Customs authorities in both the country of import and the country of
export and are often subject to import quotas, tariffs and trade agreements. when the "imports"
are the set of goods and services imported, "Imports" also means the economic value of all goods
and services that are imported. The macroeconomic variable I usually stands for the value of
these imports over a given period of time, usually one year.
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EXPORT
Export goods or services are provided to foreign consumers by domestic producers. It is a
good that is sent to another country for sale. Export of commercial quantities of goods
normally requires involvement of the customs authorities in both the country of export
and the country of import. The advent of small trades over the internet such as through
Amazon and e-Bay have largely bypassed the involvement of Customs in many countries
due to the low individual values of these trades. Nonetheless, these small exports are still
subject to legal restrictions applied by the country of export.
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UNEMPLOYMENT RATE IN NEW ZEALAND
The labour force is defined as the number of people employed plus the number
unemployed but seeking work. The participation rate is the number of people in the
labour force divided by the size of the adult civilian noninstitutional population (or by the
population of working age that is not institutionalised). The nonlabour force includes
those who are not looking for work, those who are institutionalised such as in prisons or
psychiatric wards, stay-at home spouses, kids, and those serving in the military. The
unemployment level is defined as the labour force minus the number of people currently
employed. The unemployment rate is defined as the level of unemployment divided by
the labour force. The employment rate is defined as the number of people currently
employed divided by the adult population (or by the population of working age). In these
statistics, self-employed people are counted as employed.
Natural rate of unemployment This is the summation of frictional and structural
unemployment. It is the lowest rate of unemployment that a stable economy can expect to
achieve, seeing as some frictional and structural unemployment is inevitable. Economists
do not agree on the natural rate, with estimates ranging from 1% to 5%, or on its meaning
some associate it with "non-accelerating inflation". The estimated rate varies from
country to country and from time to time.
The unemployment rate in New Zealand was last reported at 6.6 percent in the first
quarter of 2011. From 1985 until 2010, New Zealand's Unemployment Rate averaged
6.25 percent reaching an historical high of 11.20 percent in September of 1991 and a
record low of 3.50 percent in December of 2007. The labour force is defined as the
number of people employed plus the number unemployed but seeking work. The
nonlabour force includes those who are not looking for work, those who are
institutionalised and those serving in the military.
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The employment rate in1985 was 3.5 percent which increased to 5 % of the labour force
in 2010.
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POPULATION
The total population in New Zealand grew to 4.3 million in 2009 from 2.4 million in 1960, a 180
percent increase in just 50 years. New Zealand has 0.06 percent of the worlds total population
which means that one person in every 1616 people on the planet is a resident of New Zealand. the
population of the country in 1975 was 3.08 billion and 4.35 billon in 2010.
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INTEREST RATES
The benchmark interest rate in New Zealand was last reported at 2.5 percent. In New
Zealand, interest rates decisions are taken by the Reserve Bank of New Zealand. The
official interest rate is the Official Cash Rate (OCR). The OCR was introduced in March
1999 and is reviewed eight times a year by the Bank. The OCR influences the price of
borrowing money in New Zealand and provides the Reserve Bank with a means of
influencing the level of economic activity and inflation. ,From 1985 until 2010, New
Zealand's average interest rate was 8.75 percent reaching an historical high of 67.32
percent in March of 1985 and a record low of 2.50 percent in April of 2009.
the interest rate in 1985 was 20% and in 2010 it reduced drastically to 2.5%.
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INDUSTRIAL PRODUCTION
Industrial Production is an economic report that measures changes in output for the
industrial sector of the economy. The industrial sector includes manufacturing, mining,
and utilities. Although these sectors contribute only a small portion of GDP (Gross
Domestic Product), they are highly sensitive to interest rates and consumer demand. This
makes Industrial Production an important tool for forecasting future GDP and economic
performance. Industrial Production figures are also used by central banks to measure
inflation, as high levels of industrial production can lead to uncontrolled levels of
consumption and rapid inflation.
Industrial Production in New Zealand remained unchanged in the third quarter of 2010.
Industrial production measures changes in output for the industrial sector of the economy
which includes manufacturing, mining, and utilities. Industrial Production is an important
indicator for economic forecasting and is often used to measure inflation pressures as
high levels of industrial production can lead to sudden changes in prices. From 1977 until
2010, New Zealand's industrial production averaged 80.79 percent reaching an historical
high of 100.80 percent in September of 2005 and a record low of 58.60 percent in
December of 1977.
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BALANCE OF TRADE-
New Zealand reported a trade surplus equivalent to 605 Million NZD in May of 2011.
New Zealand is greatly dependent on international trade. New Zealand's economy has
traditionally been based on a foundation of exports from its very efficient agricultural
system: meat, dairy products, forest products, fruit and vegetables, fish, and wool. New
Zealand imports mainly machinery and equipment, vehicles and aircraft, petroleum,
electronics, textiles and plastics. Its main trading partners are: Australia, European Union,
The United States, China and Japan.
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New Zealand Dollar Exchange Rate Chart (NZDUSD)
The New Zealand Dollar exchange rate (NZDUSD) appreciated 19.23 percent
during the last 12 months. The New Zealand Dollar spot exchange rate specifies
how much one currency, the NZD, is currently worth in terms of the other, the
USD. While the New Zealand Dollar spot exchange rate is quoted and exchanged in
the same day, the New Zealand Dollar forward rate is quoted today but for delivery
and payment on a specific future date.
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CONCLUSION
Over the past 20 years the government has transformed New Zealand from
an agrarian economy dependent on concessionary British market access to
a more industrialized, free market economy that can compete globally.
This dynamic growth has boosted real incomes - but left behind some at
the bottom of the ladder - and broadened and deepened the technological
capabilities of the industrial sector. Per capita income rose for ten
consecutive years until 2007 in purchasing power parity terms, but fell in
2008-09. Debt-driven consumer spending drove robust growth in the first
half of the decade, helping fuel a large balance of payments deficit that
posed a challenge for economic managers. Inflationary pressures causedthe central bank to raise its key rate steadily from January 2004 until it
was among the highest in the OECD in 2007-08; international capital
inflows attracted to the high rates further strengthened the currency and
housing market, however, aggravating the current account deficit. The
economy fell into recession before the start of the global financial crisis
and contracted for five consecutive quarters in 2008-09. In line with
global peers, the central bank cut interest rates aggressively and the
government developed fiscal stimulus measures. The economy posted a
1.7% decline in 2009, but pulled out of recession late in the year, and
achieved 2.1% growth in 2010. Nevertheless, key trade sectors remain
vulnerable to weak external demand. The government plans to raise
productivity growth and develop infrastructure, while reining in
government spending.
There has been a tremendous difference in the interest rates from 20% in
1975 to 2.5 %in 2010.
The value of New Zealand dollars has depreciated with respect to that in
1975.
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