54 WAIKATO BUSINESS NEWS <strong>November</strong>/<strong>December</strong> <strong>2017</strong> CONFERENCE, EVENTS AND VENUES YOUR DESTINATION FOR ALL YOUR FUNCTIONS, AFTER WORK DRINKS OR JUST A CASUAL DINING EXPERIENCE The Helm is and always will be Hamiltons Hospitality destination 07 839 2545 22 Ulster Street, Hamilton Email Us info@thehelm.co.nz Open: Monday - Friday, 12pm - Late Saturday - Sunday, 11am - Late
WAIKATO BUSINESS NEWS <strong>November</strong>/<strong>December</strong> <strong>2017</strong> BNZ economist upbeat on economic prospects 55 Strong fundamentals in New Zealand’s economy mean despite any uncertainty generated by the election, prospects remain promising for growth rates that would still be the envy of many developed nations around the world. By RICHARD RENNIE BNZ’s head economist Doug Steel had an upbeat view of the economic landscape over the coming season for agri-business professionals and farmers at this year’s KPMG agri-business seminar. His outlook came as the government started to reveal its varied policy plans for the economy. Much of that upbeat view was also being driven by the engine room of provinces including <strong>Waikato</strong> and Bay of Plenty as primary products, with the exception of wool, all record values higher than they have been in five years. Wool continues to be the commodity under-performer, being down 30 percent on its five year average. Acknowledging the uncertainty that inevitably followed the election of a new coalition party, Steel said there were some swings and roundabouts within the policy announcements to follow the BNZ head economist Doug Steel. new government. Net migration was likely to drop from its peak of 70,000 last year to nearer 40,000 a year, and the tax cuts scheduled for April were also gone. However in their place there was the prospect of the first year of tertiary education being free, greater impetus on house construction and a $1 billion focus on specific regional development projects. All up an additional $7 billion of fiscal expenditure would be borrowed over the next four years. The one area not factored as strongly into market valuations had been the fact the Kiwi dollar was 5 percent lower than the Reserve Bank had estimated it would be in the post-election environment. “And that will be much upon its mind when setting the next round of interest rates, which may lift sooner than we thought,” he said. These may come towards the end of next year, rather than 2020. Steel was asked to comment on Winston Peters’ dark outlook for the economy in months ahead, and maintained that while economic growth may drop below 3 percent, it would still be healthy. GDP growth this year has been 2.5 percent, compared with a 10 year average of 1.9 percent and the economy continued to deliver benchmark figures “other economies would kill for” said Steel. Very strong figures across the primary sector were doing much to buoy these numbers, with horticulture, dairy, beef and sheep meat all looking at returns higher than they have been for five years. However given <strong>Waikato</strong>’s reliance upon dairy returns, Steel was cautious about how attainable Fonterra’s $6.70/ kg milk solids (MS) forecast would be for this season. Butter prices were likely to slip back off their record high prices, and skim milk powder (SMP) faced a 400,000 tonne stockpile in the European Union that was going to have to be moved sooner than later. Meantime Whole Milk Powder (WMP) faced reasonable demand from Chinese buyers. New Zealand’s energy sector ‘highly ranked’ The <strong>Business</strong>NZ Energy Council (BEC) has welcomed New Zealand’s continued “robust energy sector performance in comparison with other countries”. The World Energy Council's <strong>2017</strong> Energy Trilemma Index ranks countries on how well they achieve the energy 'trilemma' balance of security, equity and sustainability. With an overall balanced rating of AAB, New Zealand remains ninth out of 125 comparator countries and is still the best performing country in the Asia-Pacific region, and again the only non-European country in the top ten. BEC chairman David Caygill said New Zealand maintaining its top ten ranking suggested a consistent approach to the pursuit of balanced energy policies. This year Denmark leads the top ten, followed by Sweden, Switzerland, the Netherlands, UK, Germany, Norway, France, New Zealand and Slovenia. The ranking suggests New Zealand is in a good position, performing relatively better on energy security and energy equity than environmental sustainability. "New Zealand ranked 13 of 36 OECD countries for energy affordability. This is particularly noteworthy given our size and remote geographic location which means, unlike many European nations, we must import our transport fuels over significant distances and cannot rely on interconnection from other countries for our electricity and gas supplies," Mr Caygill said. This year New Zealand dropped from 36 to 42 in the environmental sustainability category (21st against OECD comparators). While New Zealand has made modest improvements in this category, other countries have shown greater advancements which has resulted in their ranking overtaking ours. The energy sector is facing three trends impacting demand and supply at an unprecedented pace: decarbonisation, digitalisation and decentralisation. "New technologies and systems are set to revolutionise the way we produce and consume energy which will lead to unprecedented opportunities for energy efficiency and emissions reductions “But we think the estimate of $6.75/kg MS is looking a bit optimistic, with WMP dipping, butter easing and SMP also staying soft.” BNZ’s estimate are for milk solids to sit nearer $6.40/kg MS, but Steel qualified that by pointing to tighter milk supplies out of NZ being likely given the run of wet weather this spring. “But it is still better than $6.12/kg MS and way better than $3.90/kg MS.” The biggest surprise from the election had been its impact upon the Kiwi dollar, falling to be 5 percent lower than the Reserve Bank had anticipated. This may feed through to put pressure on lifting interest rates sooner than later. “We think with the currency lower and inflation slightly higher and greater fiscal spend it is likely interest rates will move up towards the end of next year.” but will require new ways of thinking," Mr Caygill said. "New Zealand is among the world leaders in digitalisation and can leverage this advantage to achieve the improved emissions and efficiency outcomes sought by the new Government." Cross-sector partnerships, new ways of optimising assets, and greater use of new technology platforms open doors to greater energy efficiency on the supply and demand side and consumer value. BEC members are at the forefront of these initiatives.
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