MAJOR MACRO ECONOMIC INDICATORS
|2016||2017||2018 (e)||2019 (f)|
|GDP growth (%)||3.6||3.0||3.0||2.9|
|Inflation (yearly average, %)||0.6||1.9||1.4||1.7|
|Budget balance* (% GDP)||0.9||1.4||0.8||0.7|
|Current account balance (% GDP)||-2.4||-2.7||-3.5||-3.8|
|Public debt (% GDP)||32.6||31.7||30.4||29.4|
(e): Estimate. (f): Forecast. *Fiscal year 2019: July 2018 - June 2019.
- Proximity to Asia and Australia
- Touristic appeal
- Large and competitive agricultural sector
- Balanced public accounts; contained public debt
- Dynamic demographics thanks to immigration
- Quality of life
- Dependency on foreign investment
- High household and corporate debt levels (particularly in agriculture)
- Reliance on Chinese demand
- Shortages of skilled labour
- Housing shortage and housing price surge (+60% since 2008)
- Lack of R&D
Growth remains strong
Growth will slightly slow due to the stalling progression of consumption progression, the main contributor to GDP development. Although it will be supported by low interest rates, an accommodating fiscal policy, and rising real wages thanks to low and declining unemployment, consumption will suffer from high household debt (166% of income), the cooling housing market, and higher inflation. Inflation will be spurred by higher oil and import prices as a result of the New Zealand dollar’s continued depreciation. However, considering that core inflation (not including commodity prices) remains well within the inflation target range (1-3%), the central bank is unlikely to trade off growth prospects to fend off inflation in 2019: the monetary policy is very likely to remain accommodating, with a continuation of the 1.75% policy rate (a record low).
Both foreign and domestic investment growth will slow, with net FDI flows becoming negative, as a result of declining confidence and uncertainty regarding global trade and national governance. Notably, a government decision to curb immigration (by hardening the access to low-skilled work and student visas, supposedly to reduce housing price pressures) triggered fears of future shortage of workers for businesses, and was perceived as a populist policy. Furthermore, the nonetheless visible cooling of the housing market will translate into reduced construction investment.
The trade balance should be under less pressure than in 2018, as milk prices should remain higher than in 2018 throughout the year. Agricultural products (dairy and meat especially) make up the main part of exports, which leaves the performance of the external sector quite exposed to fluctuations in commodity prices and climate conditions. The slowdown in the Chinese economy, the main recipient for NZ exports, will also impact trade. The tourism sector is expected to perform well, although its contribution to growth will likely be smaller than that of goods exports.
Solid budget situation; current account imbalance
The government limits public spending to follow its budget responsibility objectives – net debt should be under 20% of GDP in 2022. Public debt will continue to decline and the budget will stay in surplus in 2019. Social spending is the main expenditure item, including income tax exemptions for those on very low incomes, as well as increases in family allowances. The country will have to find a way of dealing with an increasing deficit in its social security system (ageing population). Substantial infrastructure and housing investments are also expected, notably with the ongoing reconstruction of the roads and railways damaged in the November 2016 major earthquake and the KiwiBuild Programme. Moreover tax incentives for private investment in R&D will be introduced, with the goal of bringing R&D to 2% of GDP.
The current account deficit will again worsen, but much less steeply than in 2018. The structural deficit of the income balance is linked to the outward transfer of profits by foreign firms. In 2019, the trade balance will also show a wider deficit as the import bill increases with investment related imports, higher oil prices, and the local currency’s depreciation. It will also be under pressure due to milk prices below their long-term average (although they have increased since 2018). The balance of services, however, should remain in surplus, mainly thanks to tourism. Moreover, the financial account will also continue to show a deficit because of the repayment of external debt (above 90% of GDP, mainly household debt) and the low domestic savings rate.
The coalition government carries on
In the September 2017 parliamentary elections, the conservative National Party, in office since 2008, led the vote with 56 seats out of 120, but was short of an absolute majority. Long negotiations led the centre-left Labour Party (46 seats) to form a coalition government with the support of the populist New Zealand First party and the Green Party. After over a year in office, Prime Minister Jacinda Ardern continues to enjoy high popularity rates, although delivering on promises to increase disposable income, as well as handling the housing crisis and child poverty, is challenged by a prudent fiscal stance and prospects of slowing GDP growth. The coalition does not seem at risk in 2019, although misconducts and resignation within the Labour party and the government have tarnished its image. Nevertheless, disagreements between the coalition member parties could derail the coalition, especially as the National Party remains a powerful opposition force in Parliament.
At the international level, the country will benefit from being a founding member of the CPTPP, although having the United States and China as its main trade partners spreads uncertainty in the global context of trade wars and rising protectionism.
Last update : February 2019
The primary payment methods are card (debit card and credit card) and electronic credit or debit (direct debits and credits, automated bill payments and electronic transfers). There is a rapid growth in the use of contactless payments, mobile phone-based applications and on-line payments. Although cash remains important, its use is rapidly reducing and cheque usage halved between 2013 and 2016.
Wire transfers and SWIFT bank transfers are the most commonly used payment methods for domestic and international transactions. Most of the country’s banks are connected to the SWIFT network.
The debt collection process begins with the serving of a letter of demand, in which the creditor notifies the debtor of his payment obligations - including any contractual interest due – with a time limit to make the payment.
Summary judgment proceedings
If the creditor does not receive any payment following the letter of demand, summary judgment proceedings can be issued. This procedure is intended for situations where the debtor has no real defence against the claim. An application can be made to the District Court or High Court, depending on the value of the claim. A statement of claim must be filed, along with a notice of proceedings, an application for summary judgment and a supporting affidavit by the creditor (or in the case of an entity, an individual with personal knowledge of the facts), which sets out the facts of the claim. A summary judgment typically involves a hearing, which lasts around one day (if the matter is defended), with evidence given by way of affidavit rather than requiring witnesses. If the application is successful, the Court may enter a judgment in favour of the creditor. If the application is undefended, judgment may be entered by default in favour of the creditor, without the need for a hearing. If the defendant is able to show an arguable defence, the Court may decline summary judgment and direct the matter to be heard as an ordinary proceeding.
Ordinary proceedings are initiated by filing a notice of proceeding and a statement of claim. Depending on the value of the claim, these proceedings can take place in the District Court (up to NZD 350,000) or the High Court (claims of a higher amount). Unlike summary judgment, an ordinary defended proceeding may involve additional processes, such as discovery, hearing of evidence and interlocutory applications.
The High Court determines appeals from the District Court. The Court of Appeal has jurisdiction to hear appeals from the High Court, but this is generally restricted to appeals on questions of law. Appeals to the highest appellate court in New Zealand, the Supreme Court, can only be heard with leave of the Court. Leave will be granted if the Court is satisfied that it is necessary in the interests of justice to hear the appeal.
Enforcement of a legal decision
If the Court enters judgment in favour of the creditor, there is no appeal, or all appeal avenues have been exhausted, the creditor can apply to the High Court, or District Court (depending on the value of the claim), to seek enforcement action, which can include a deduction from the debtor’s wages or benefits (if the debtor is an individual), seizure of property, garnishee proceedings, or placing a charge on the debtor’s property. Foreign judgments must first be recognised by the Court under the Reciprocal Enforcement of Judgments Act 1934, or common law.
If the creditor does not receive payment after obtaining judgment and the debtor is an individual, the creditor can issue a bankruptcy notice. Failure to comply with a bankruptcy notice is an act of bankruptcy.
If the debtor does not make payment pursuant to the letter of demand and the debtor is a company, a further potential step is for the creditor to prepare and serve a statutory demand for the amounts outstanding. A statutory demand can only be issued if there is no substantial dispute over the debt. Once served, the debtor has 15 working days to pay the debt, or to enter into an arrangement for payment which is agreed by the creditor. If the debtor company does not make payment pursuant to the statutory demand, the creditor has a further 30 working days begin to liquidation proceedings against the debtor company, due to non-compliance with the statutory demand as evidence of the debtor’s inability to pay its debts. However, a debtor company can make an application to set aside a statutory demand within 10 working days of being served with it. The Court may set aside the statutory demand if there is a substantial dispute on whether or not the debt is due, if the debtor company has a counterclaim, set-off or cross-demand, or if there are other adequate grounds.
Liquidation involves the realisation and distribution of a debtor company’s assets when the company is insolvent, or does not expect to remain in business. A liquidator is appointed who takes over the management of the company, realises its assets, pays its creditors and distributes the remainder to its shareholders.
Another option is to enter into a creditors’ compromise with the debtor. A creditors’ compromise is a binding agreement between a debtor company and its creditor(s) regarding the payment of its debts, with terms and conditions that are less exacting than the strict legal rights of creditors. A compromise may involve payments over time, deferred payments, or accepting a lesser sum in full and final settlement of the debt. Once a creditors’ compromise is approved by the required majority of creditors, or the Court, the compromise binds all creditors.
The debtor company may go into voluntary administration to maximise the chances of an insolvent company continuing to operate, or if that is not possible, to allow for a better return for creditors than immediate liquidation. It enhances the existing creditors’ compromise procedure as an alternative to liquidation, by imposing a moratorium on creditors taking steps to enforce their debts.
Other alternative processes
The Disputes Tribunal conducts an informal and confidential process run by a referee to encourage both sides to reach an agreement, or make a binding decision if both sides cannot agree. This can be a less costly option, as it avoids lawyers. The Disputes Tribunal can only hear claims for disputed debts of below NZD 15,000 or, if both parties agree to extend the financial limit, to up to NZD 20,000.
Arbitration or mediation (often less expensive than court proceedings) may be used to resolve disputes and obtain more rapid out-of-court settlements.