20 Jul 2015
Words
Brooke Kelly
New Zealand & Australia's Rivalry Takes to the Economic Arena
Most of us love a bit of Trans-Tasman rivalry, at least when it comes to cricket or football. But now we might have to get used to New Zealanders going on about how much better their economy is. Thumping us at rugby is one thing, but trouncing our economic performance?
Despite a softer approach in the 2015 Budget, Australia still faces another year of political wrangling to tackle ‘debt and deficit’. Meanwhile, the Kiwi economy has been elevated to “rock star” status. HSBC economist Paul Bloxham, who first called New Zealand a rock star economy, says the NZ dollar, like its economy, is going to be strong for some time. And plenty of other commentators agree.
The NZ dollar has been knocking on the door of the magic 1:1 exchange rate barrier all year. Apparently, the last time it nudged past the AUD was in October 1973, and it only stayed there for a few hours.
Our current situation is a big change from Australia’s traditional position of trans-Tasman economic domination. We survived the GFC with our two-decade long record of economic growth unbroken. New Zealand, on the other hand, suffered an 18-month recession followed by a tragic earthquake that flattened its second largest city.
So, why have the tables turned?
For one thing, New Zealand’s dairy industry is going from strength to strength whereas our farming sector has been hit hard by drought and is struggling with high wages. And, while our mining boom has wound down and commodity prices slumped, New Zealand is in the midst of a construction and jobs boom.
Some commentators point to the positive actions of New Zealand’s National government, headed by John Key, including welfare reforms, part-privatisations and tax rearrangements. Our government has been comparatively reform-shy.
Last year, New Zealand’s economic growth rate was 3.3%, significantly higher than Australia’s at 2.7%. Actually, New Zealand’s economy outperformed every Organisation for Economic Cooperation and Development (OECD) economy. That has also translated into New Zealand having a lower unemployment rate than in Australia.
One impact has been a dramatic slowing in the number of New Zealanders migrating to Australia. During the GFC, reports suggested migration to Australia soared 40%. Now, Statistics NZ tells us, departures of New Zealand citizens to Australia have more than halved in the last two years, falling from 46,600 in the year to March 2013, to 22,600 in the March 2015 year.
In fact, it reports a net loss of people to Australia in the March 2015 year of just 2,300 – the smallest net loss since 1992. The recent decline has been dramatic, down from a net loss of 35,300 in the March 2013.
So, what does all this NZ economic prosperity mean for Australia’s tourism and accommodation property industries, both of which have historically relied heavily on the New Zealand market?
Well, the news is all good. Travelling Kiwis are cashed up and on the move. Trips by New Zealand residents in the March 2015 year hit a record high (up 5%) and half of all those trips – 1.1 million – were to Australia.
Actually, it could be a toss up this winter which trans-Tasman air route is the busier. Traditionally, the stronger winter demand comes from Australians heading to New Zealand for the snow. But, with the strong NZ dollar, the balance may shift.
Expectations are that large numbers of Kiwis, bolstered by their improved spending power, will be heading this way to enjoy Australia’s warmer winter destinations. New Zealand has always been our strongest international tourism market, so their prosperity is good news for our accommodation operators.
Resort Brokers Australia managing director, Ian Crooks, believes his homeland’s current prosperity will also be a boon for accommodation property owners in the market to sell.
Crooks, himself a Kiwi expat, remembers the New Zealand dollar only bought him 50 Australian cents when he moved here in 1985 chasing better business opportunities.
“Although the number of Kiwis migrating to Australia for economic reasons may have slowed, I don’t see any reduction in demand from New Zealand buyers for Australian accommodation property and businesses,” he said.
“The appeal of Australian investments is still strong, and now they’ll be coming because, with their better buying power, our properties represent much better value.
“All the things Kiwis have always loved about Australia are still here – the warmth, the beaches, our terrific lifestyle. Despite New Zealand’s current economic buoyancy, Australia does still have better living standards in a lot of respects.”
Mr Crooks said New Zealand buyers have long provided a very strong market for Australian accommodation businesses, particularly management rights in coastal regions, and lifestyle is a major drawcard.
“Now, more than ever, they can afford to come,” he said. “Enquiry from across the Tasman is very strong.”
The last word on the new economic rivalry between the Aussies and the Kiwis should go to Mikayla Novak, a senior researcher at the Institute of Public Affairs. In a recent article for Fairfax Media, she made the following wry observation:
“If Australia uses the threat of a resurgent Kiwi economy to reform itself, it could be the greatest contribution New Zealand has ever made to Australian life, aside from Crowded House, Russell Crowe, Phar Lap, and the pavlova.”
