With New Zealand’s economy defying trends seen in other countries, experts like veteran New Zealand businessman Steve Collie see continued strength in New Zealand’s dollar, built upon the strength of the country’s workers.
The data underlying New Zealand’s continued strong economic performance is robust, encouraging optimistic forecasts from market watchers. New Zealand has an export-driven economy, but demand overseas has been stable for a number of years, sparing the island nation problems that can be caused by variation in prices.
“The broad merchandise trade themes should sound familiar: booming exports driven by very strong primary exports, underpinned by high international prices and rising volumes,” wrote Stephen Toplis, head of research at the Bank of New Zealand, in a note describing the current state of New Zealand’s economy.
Although economists point to increased exports and prices for agricultural products overseas, Collie also points to the work ethic of New Zealand’s population as evidence of an upward trend in productivity.
“New Zealand’s economy’s been successful over the last few years because of the work of the blue collar. We’re a country rich in pride, and we’re also a hard working group,” said Collie. “From construction to sand dredging, we’re a nation of hard workers, and we’re not afraid to get our hands dirty.”
Even though exports have driven New Zealand through a period of expansion, both political and financial leaders have been prudent and conservative in public spending, resisting the urge to expand social safety net spending. Instead, the center-right government led by Prime Minister John Key has made a point of controlling public sector debt.
“When you have an economy running quite hot and where there’s still a desire to reduce overall debt you have to run a budget that’s relatively austere and doesn’t add to growth pressures,” said Stephen Toplis to the Wall Street Journal, outlining the challenges facing New Zealand’s finance minister, Bill English.
However much the government may endeavor to control the growth, New Zealand is a hot spot in the international economy, with growth projected to surpass that seen in other developed economies.
“We only really see New Zealand as the developed market economy that can probably beat [3 percent growth] this year. Given New Zealand has already started to tighten monetary policy, this underlines our point that the risks remain skewed towards earlier Bank of England policy tightening than the second quarter of 2015 point currently penciled in by financial markets,” James Knightley of ING bank told the Guardian, describing his forecast for New Zealand’s growth prospects in 2014.
Confidence in the future is far from being in short supply. “New Zealand has rebounded from the global recession and emerged as a serious financial power,” said Steve Collie, in a statement that summarizes the common attitude found among residents of the islands.
The attitude is striking to businessmen from other countries who visit New Zealand. While businesses in most developed countries contend with nervous consumers and government austerity, business and individuals are confident in spending kiwis.
Conditions in New Zealand are very different from those found in the U.K., where Bloomsberry also operates. Giles Barker, managing director of the Auckland based chocolate maker, characterized domestic demand as strong, and told the Wall Street Journal that his company intends to expand production.
“You get back here and it’s like you are on a different planet. The entire mood is completely different. There are completely confident buyers, the sell rate is enormous,” said Barker.
Over the past year, the New Zealand kiwi has continue to strengthen, and is one of the few currencies to increase in value against the U.S. dollar in the same period of time.
Other countries have been subject to lower demand after the devastating winter season, but New Zealand has been buoyed by exports that have weathered the problems seen in other developed countries.
“When the U.S. catches a cold, Canada gets the flu,” Camilla Sutton, the chief currency strategist at the Bank of Nova Scotia in Toronto, told the Financial Post. “What Australia and New Zealand have is, if one of their export economies is not as strong, then they have the other economies to pick up the difference.”
The Bank of Canada may have to lower lending rates over the next year to increase demand among businesses and consumers. Fiscal authorities in New Zealand are left with quite a different problem.
“We are in a pervasive economic upswing owing to the Canterbury rebuild, construction activity in Auckland, consumer buoyancy following house price increases, and a four-decade high in the terms of trade,” Westpac Bank chief economist Dominick Stephens said. “Consequently, the Reserve Bank will have to gradually increase interest rates over the course of the year.”
Far from a machine of moving parts controlled by algorithms, a nation’s economy is the sum of its population’s economic activity.
“The performance of the New Zealand dollar against foreign currency is impressive, and a testament to the resiliency and strength of our country and its people,” said Steve Collie, expressing pride in his compatriots and the strength of their labors.
Samantha Nash contributed to this article.