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New Zealand Economic and Financial Overview 2014

Industrial Structure and Principal Economic Sectors

Primary Industries

The agricultural, horticultural, forestry, mining and fishing industries play a fundamentally important role in New Zealand's economy, particularly in the export sector and in employment. Overall, the primary sector directly accounts for 6.0% of real GDP and contributes over 50% of New Zealand's total export earnings.

Agriculture and Horticulture

Agriculture directly accounts for around 4.5% of GDP, while the processing of food, beverage and tobacco products accounts for a further 4.6%. Downstream activities, including transportation, rural financing and retailing related to agricultural production, also make important contributions to GDP. Dairy farming is the predominant agricultural activity, followed by beef and sheep and horticulture.

After falling during the GFC, commodity prices recovered strongly during 2009 and were boosted through late 2010 and early 2011 as global growth and demand returned. Over the second half of 2011 and the first half of 2012, commodity prices came off their highs as renewed euro area concerns emerged. However, prices have recovered since then, partly as a result of reduced supply, to stand at historically high levels in late 2013.

Rising prices over 2013 have enabled New Zealand's major dairy exporter, Fonterra, to lift the farmgate milk price for the 2014 season by 50 cents to $8.30 per kilogram of milksolids.

Wine and kiwifruit are the principal horticultural products. Other significant export products include apples and pears, fresh and processed vegetables, and seeds.

The following table shows sales of the principal categories of agricultural products for the years indicated and as a percentage of agricultural sales for 2013.

Table 8 - Gross Agricultural Production1
Year ended 31 March 
(dollar amounts in millions)
2010 2011 2012 2013 2013
% of Total
Dairy 8,888 10,960 10,567 10,386 47.6
Cattle 1,848 2,129 2,289 2,316 10.6
Sheepmeat 2,165 2,364 2,820 2,263 10.4
Fruit 1,983 1,882 2,071 2,017 9.2
Vegetables 988 1,062 1,065 987 4.5
Sales of live animals 766 848 871 866 4.0
Crops and seeds 799 588 745 751 3.4
Wool 450 563 675 587 2.7
Non-farm income 387 399 408 472 2.2
Other horticulture 259 243 251 239 1.1
Other farming 252 225 232 210 1.0
Agricultural services 221 216 216 220 1.0
Deer 189 200 234 200 0.9
Poultry/eggs 156 153 167 167 0.8
Pigs 179 169 185 174 0.8
Value of livestock change 70 87 200 (30) (0.1)
Total Gross Revenue 19,600 22,089 22,995 21,826 100.0
  1. All data estimated.

Source: Ministry for Primary Industries

Forestry

Forestry and logging makes up around 1.1% of GDP and is the basis of an important export industry. Almost 70% of wood from the planted production forests is exported in a variety of forms, including logs, wood chips, sawn timber, panel products, pulp and paper, and further manufactured wooden products, including furniture.

For the year ended June 2013, the value of exports of forestry products was $4.4 billion, 9.7% of New Zealand's total merchandise exports. China, Australia and Japan were the largest markets for forestry products. China was the largest market for logs and wood chips, sawn timber and pulp. Japan was the largest market for panels and Australia the largest market for paper and paperboard.

New Zealand's climate and soils are well-suited to the growth of planted production forests. These forests cover an area of 1.8 million hectares and produce over 99% of the country's wood. Radiata pine, which makes up 90% of the plantation estate, matures in 25 to 30 years, more than twice as fast as in its natural habitat of California. This species has had considerable research investment and has demonstrated its versatility for a wide range of uses. The second most important species is Douglas fir, which makes up 6% of the planted forest area.

For the year ended June 2012, an estimated 25.2 million cubic metres of wood were harvested from production forests, an increase of 4.9% from a year earlier. A relatively stable harvest of 26 to 28 million cubic metres a year is forecast for the period to 2016. Wood availability is then forecast to increase rapidly to 35 million cubic metres per annum between 2016 and 2025. Market conditions and logistical constraints (availability of logging crews, transport and wood processing capacity) will dictate how quickly the additional wood can be harvested.

Logs, wood and wood article export values increased 10.4% in the year to June 2013, owing to a rise in the world price of forestry products and high demand from China. New Zealand dollar prices for export logs are expected to remain elevated with strong demand from China and low supply from competitors.

Fishing

New Zealand has an Exclusive Economic Zone (EEZ) of 4.1 million square kilometres supporting a wide variety of inshore fish, some large deep-water fin fish, squid and tuna. New Zealand's unpolluted coastal waters are also well-suited to aquaculture. The main species farmed are Pacific oyster, green-lipped mussels and quinnat salmon.

Fishing is a major New Zealand industry and an important merchandise export earner. Fish and other seafood accounted for $1.5 billion in export revenues in the year ended June 2013, a 0.8% increase from the previous year.

The most important export species are green-lipped mussels, hoki, mackerel, squid and tuna. Smaller volume but high value exports are rock lobster, abalone and orange roughy. The main export markets are China, Hong Kong, Australia, the United States and Japan. Around 83% of export volumes are from wild capture with the remainder from aquaculture. Ninety percent of New Zealand's commercial seafood production is exported.

The conservation and management of the fisheries is based on a quota management system designed to protect the future sustainability of the fisheries while facilitating their optimum economic use. The system uses markets, together with scientific assessments of fish stocks, to allocate fishing rights without arbitrarily restricting fishing methods.

Energy and Minerals

New Zealand has significant natural energy resources, with good reserves of coal, natural gas and oil/condensate, extensive geothermal fields, and a geography and climate which have supported substantial hydro-electric development. The main minerals mined, in addition to coal, are gold, silver, ironsands, various industrial minerals and gravel for construction.

Programmes for the exploitation of New Zealand's energy resources were accelerated after the first oil shock in 1973. Oil and gas exploration was increased and energy conservation programmes were developed and promoted. As a result, New Zealand is able to meet a significant proportion of its overall energy requirements.

There is a renewed interest in the development of energy and mineral resources to contribute to economic growth. Since 2012, an annual permitting round has been used exclusively for allocating petroleum exploration permits. The Exclusive Economic Zone and Continental Shelf Act was passed in 2012 and requires all petroleum and mineral operations within the exclusive economic zone and continental shelf to seek consent from the Environmental Protection Authority. Within New Zealand's territorial waters, operators must be permitted through the Resource Management Act.

Natural Gas: Natural gas is currently produced from 17 fields and wells in the Taranaki region of the North Island, with production dominated by the inshore Pohokura oil and gas field, the long-standing offshore Maui field and smaller onshore fields. There are three main uses for gas in New Zealand: electricity generation, petrochemical production and fuel for industrial sectors.

Gross natural gas production was 188 petajoules in the year to June 2013. Natural gas production had declined sharply after the Maui field peaked in 2001, before stabilising through to early 2007. Production has since increased with the continued development of new smaller and more diverse fields and the introduction of the Pohokura field in 2006. The offshore Kupe oil and gas field, which was brought into production in 2009, has been a significant contributor.

Oil: New Zealand's crude oil production was 91.3 petajoules in the year to June 2013 (around double that produced in 2006), of which 95.6% was exported. New Zealand exports light crudes, while importing heavier crudes suited to its refining plant at Marsden Point. While New Zealand is still a net importer of oil, oil exports are becoming increasingly important with the value of crude oil exports accounting for 3.4% of total exports in the year to September 2013.

Crude petroleum production has been increasing since the second half of 2006 when the Pohokura field commenced production. The Tui Area Oil Fields, located in the offshore Taranaki basin, commenced commercial production in the middle of 2007 and produced 32.5% of New Zealand's oil in the 2009 year. New Zealand's production of crude oil was further boosted in late 2008 as Maari, a new field also located off the Taranaki coast, started production. The Maari field reached full production in June 2009, around the same time that production from the Tui fields began to decline.

Coal: Coal is New Zealand's most abundant energy resource with total in-ground resources estimated at about 15 billion tonnes, of which 8.6 billion tonnes is judged to be economically recoverable from 42 coalfields. Of this amount, 80% is relatively low-grade lignite, 15% is middle-grade sub-bituminous, and the remaining 5% is bituminous. Lignite is used mainly for industrial fuel and sub-bituminous coal for industrial fuel, steel manufacture, electricity generation and domestic heating. Bituminous coal, which is typically very low ash, low sulphur coking coal, is mainly exported for metallurgical applications.

In the June 2013 year, total coal production was 4.7 million tonnes, a 7.2% decrease over June 2012. Coal production is centred on the Waikato (mainly for several major industrial users and the Huntly power station), the West Coast (mainly for export), and Otago/Southland (mainly for local industrial markets).

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