On The Road With "Asia Squawk Box"
All this week, CNBC's 'Asia Squawk Box' is on the road in New Zealand. 'Asia Squawk Box' will take a look at all things Kiwi -- its economy, the booming tourism industry, New Zealand's growth as a film locale and post production facility, its wining and dining exports and much more.
We speak to a number of New Zealand's leaders including Finance Minister Michael Cullen and Economic Development Minister Trevor Mallard on how the country is faring. And we'll also be talking to key business innovators like Matt Aitken of Weta Digital and Tony Nowell of Zespri, the world's largest kiwi fruit exporter.
New Zealand is the world's fifth freest economy, behind Australia and the U.S., as ranked by the Heritage Foundation and The Wall Street Journal's Index of Economic Freedom. Its gross domestic product (GDP) for 2006 was almost $104 billion. Annual income growth has been very high, having expanded almost 50% since 2000.
The NZSX 50 Index is up by 6.2% year to date. In comparison with other Asian markets, Australia's S&P/ASX 200 Index has gained 19%, Hong Kong's Hang Seng Index is up 44.5% and Japan's Nikkei 225 Average is up by a mere 0.6%.
GDP grew 3.2% year-on-year in the second quarter, the fastest pace in 2½ years, and topped the 2.6% increase expected by economists. GDP growth is estimated to be 3% for 2007, driven by strong domestic demand. And according to the Economist Intelligence Unit, real GDP growth will average 2.9% during 2009-12, underpinned by firm growth in both domestic demand and exports.
A strong economy has raised serious worries over inflation in New Zealand. Finance Minister Michael Cullen has expressed the government's concern about inflation, "With the maintenance of a relatively tight monetary and fiscal policy, we're still pushing at the top end of the inflation band," he told reporters last week.
Central bank Governor Alan Bollard expects annual inflation would accelerate to the top of the 1% to 3% range he targets by the end of 2007. It is unlikely that the official cash rate will be cut from a record high 8.25% for some time to come.
Just this past July, the New Zealand dollar soared to a 22-year high, making imports cheaper and exports more expensive. New Zealand's current account deficit stands at 8.2% this past June quarter.
On Thursday, 18 October (7:40 a.m. HK/Sing time), 'Asia Squawk Box' will speak to Finance Minister Cullen on his views on the New Zealand economy, inflation and interest rates.
New Zealand is heavily dependent on trade, particularly in agricultural products, which make up 28% of output. Its principal export industries are agriculture, horticulture, fishing and forestry. These make up about half of the country's exports.
One of the most symbolic of all New Zealand's agricultural products is the kiwi fruit. This innocuous green-gold fruit is New Zealand's largest single horticultural export, earning around $650 million a year, nearly 40% of the sector's $1.6 billion export returns. But returns are set to fall by around 12% in 2007/08 due to a high New Zealand dollar, tougher competition and high volumes of fruit, industry marketer and exporter Zespri says.
On Tuesday, 16 October (8:10 a.m. HK/Sing time,) 'Asia Squawk Box' talks to Zespri's CEO Tony Nowell about the company's corporate strategy with regards to the surging New Zealand dollar and its erosion on returns and the outlook for the fruit-growers industry.
This is just a snapshot of the stories and interviews we will be bringing you all through the week. Bookmark this page and stay tuned for all things Kiwi.