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30 October 2017

Economy held afloat as New Zealand voted for new Prime Minister


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Economy held afloat as New Zealand voted for new Prime Minister

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By Daniel Blizzard, CEO

Politics has, and continues to be, the primary focus for the New Zealand economy in the wake of the September election. Particularly as Jacinda Ardern has been announced as New Zealand’s fortieth – and second youngest – Prime Minister of Aotearoa/New Zealand.

Currently, 71.2 per cent of businesses expect politics to have an impact on their ability to grow this quarter, with SMEs the most sensitive to the political sphere, according to our latest Alleasing Equipment Demand Index (the Index).

From an industry perspective, 25.0 per cent of manufacturers anticipate politics to have a significant impact on their businesses over the next three months. Despite this concern, manufacturers remain focused on production, with 53.6 per cent intending to increase their asset base before the end of the calendar year.

As can be expected, agriculture, forestry and fisheries also anticipate politics will affect their operations, with 22.9 per cent of this group anticipating a significant effect on their operations.

New Zealand to Embrace a New Prime Minister and New Tech

Several themes appeared in this quarter’s edition of the Index, including New Zealand’s continued embrace of new technology.

An overwhelming majority of businesses – 38.8 per cent – cite their ability to compete effectively at home and abroad would be drastically hindered should they not invest in this area.

As for the mining and agricultural sectors, higher cost of origination was the main focus, with respectively 42.9 per cent and 38.2 per cent of businesses in these industries indicating this as a concern.

In retail, a sector which has not been particularly prosperous over the past couple of years, 27.8 per cent of retailers cite the higher cost of headcount as their main concern. But much like the manufacturing sector, retailers continue to be focused on production with 38.9 per cent, an increase of 2.6 per cent from the June quarter, intending to increase their asset base, indicating a level of confidence in the economy. Whereas in Australia, only 8.0 per cent of retailers intend to increase their asset base. Australia and New Zealand may not be far away from each other geographically but business sentiment appears to be worlds apart.

For the fourth consecutive quarter, the percentage of New Zealand businesses looking to adopt Industry 4.0 technology continues to increase, with 23.8 per cent intending to implement big data services, automation, artificial and/or drones, compared with 16.2 per cent in January 2017. Leading the robot revolution is the agriculture sector with 66.60 per cent of those looking to increase their asset base, intending to invest in this area.

Currently, 71.2 per cent of businesses expect politics to have an impact on their ability to grow this quarter, with SMEs the most sensitive to the political sphere.

Fast facts

New Zealand’s economy is relatively healthy, with economic growth of 2.5 per cent expected for this financial year, compared to Australia’s predicted growth of 1.8 per cent.

This is also reflected in growing demand for new plant and equipment. This quarter’s edition of the Index indicates 47.6 per cent of businesses intend to increase their asset base, a much higher figure than Australia’s at 26.6 per cent.

Overall, 45.5 per cent of businesses intend to increase their asset base, with Auckland and Christchurch the two cities expected to invest the most, with respectively 49.4 per cent and 42.1 per cent of businesses intending to invest in equipment this quarter. Both of which have seen an increase from the June quarter, with Auckland at 1.6 per cent and Christchurch at a higher 2.8 per cent.

With the continued increase of new technology and heightened economic growth, the many businesses intending to increase their asset base and a new political environment (despite any potential concerns), bodes well for the financial performance of Kiwi businesses this quarter.

New Zealand’s robot revolution is continuing which we are expecting to continue over 2018. Dependent on what decisions and changes are made in the newly formed coalition government under the leadership of a new Prime Minister, the future for New Zealand businesses looks very bright indeed.

For more information download your free copy of the Equipment Demand Index.

NB. The research and publication of the Equipment Demand Index was conducted under Maia Financial’s previous name, Alleasing. 

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