Market Report: New Zealand

From the May 2019 issue.

The thriving sovereign island country in the southwestern Pacific Ocean, New Zealand, is making some major changes at government and industry levels to compete with the rest of the world.

New Zealand’s Minister for Economic Development, David Parker, presented a manufacturing sector report last year that celebrated the emergence of new and inventive manufacturers, in light of a hard slog following the Global Financial Crisis.

According to his opening statements in Beyond Commodities: Manufacturing into the future, the manufacturing sector is a diverse, innovative and vitally important part of New Zealand – at the time making up 12 per cent of the economy, and directly employing more than 240,000 people and accounts for over half of its total exports.

He explained that manufacturing is a key contributor to New Zealand’s regional economies, bringing employment and investment. “Manufacturing has one of the highest proportions of spending on research and development (R&D) in the private sector. We can build from this strong position and do more to encourage additional R&D spending. This will foster innovations that make us more productive and competitive internationally.”

As a relatively small economy, distant from international markets, manufacturing in New Zealand faces challenges. According to Parker, it is not generally possible for New Zealand manufacturers to compete on price with the industrial powerhouses of the world, which have advantages of scale and proximity to key markets. He contended that New Zealand firms compete through the high quality and reliability of their products, the innovation and creativity in their design, the excellence of their service offering and the intelligent targeting of valuable niche markets.

To put the country’s economy into perspective: New Zealand’s trade surplus narrowed to $12 million (€7.2 million) in February 2019 from $188 million (€113.5 million) in the same month of the previous year and compared to market expectations of a $109 million (€65.8 million) deficit. Trading Economics reported that imports rose 12.9 per cent year-on-year and exports increased at a softer 8.3 per cent. The 12-month trade balance recorded a $6.62 billion gap (€3.9 billion) as opposed to a $3.06 billion (€1.8 billion) shortfall the year earlier).

Exports from New Zealand advanced 8.3 per cent year-on-year to $4.82 billion (€2.9 billion) in February 2019, after declining 3.9 per cent in December. Exports were mostly boosted by higher sales of milk powder, butter and cheese, which jumped 12.3 per cent, with milk fats and milk powder rising 18 per cent and 16 per cent respectively. Also, sales of logs and wood climbed 13.2 per cent. Meanwhile, exports of meat and edible offal decreased 9.6 per cent. By destination, exports when up to China (9.7 per cent) and the US (4.0 per cent) while it fell in Australia (-13.1 per cent), the EU (-12.3 per cent) and Japan (-2.8 per cent).

Parker recognises the importance of actively encouraging investment in both human and financial capital into innovative, high-value industries, which is why continued growth of ‘high-value’ manufactured exports will help to diversify New Zealand’s economy.

Andrew Carpenter, Managing Director of TR Group, says that the overall uptake of heavy vehicle equipment in New Zealand is increasing, in line with global trends.

“TR Group specialise in the rental and lease of trucks and trailers,” he says.

“We have a fleet size of 5,300 vehicles, with around 7,000 vehicles under our management all told.

“On the trailer front we have 1,600 trailers, around 600 rentals and 1,000 leased. These cover virtually every category in the market: general freight curtainsider and flat decks, container skels and swinglifts, refrigerated, alloy and steel tipping trailers, transporters, food grade and petroleum tankers, logging, livestock and various miscellaneous.”

Carpenter explains that there have been significant changes to the industry over the past 10 years, as fleet operators have invested in higher productivity vehicles.

“The new norm has become 23-metre, nine-axle truck and trailer combinations running at 50 tonnes,” he says. “We also have seen refrigerated semi-trailer dimensions and axle configurations change, with what is likely to be the final change coming through last year when the overall width was increased to allow pallets to be loaded side by side.”

The New Zealand Government announced in April that it has shared a commitment with industry leaders to transform the island country’s construction sector.
Prime Minister, Jacinda Ardern, said in a statement that the Construction Sector Accord was a new way for Government and industry to work together to create lasting, positive change in the sector.

“The wellbeing of New Zealanders is intrinsically linked to safe, durable and affordable homes, buildings and infrastructure,” she said.  “To meet the future needs of New Zealand, both Government and industry recognise that we need to work differently.”

Politician, Jenny Salesa, elaborated that the Construction Sector Accord sets out an agreed vision, including better procurement practices, improved Government construction pipeline management and stronger building regulations.

“Strengthening the partnership between industry and Government will help us make that step change towards a more productive, innovative and resilient construction sector,” she said.

As the New Zealand Government aims to work harder with industry, time will tell how these ambitious plans flourish and how that may directly impact the local trailer market in terms of increasing demand for specialised equipment spec’d for construction and infrastructure works.

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