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New Zealand Economic and Financial Overview 2015

Principal Trading Partners

China: China overtook Australia in 2013 to become New Zealand's largest trading partner, with bilateral trade amounting to $19.3 billion in the year ended September 2014. A Free Trade Agreement between New Zealand and China commenced on 1 October 2008 when New Zealand became the first developed country to negotiate such an agreement with China. In the year to September 2014, exports to China comprised 22.2% of New Zealand's total exports, with the major categories being milk powder, meat, logs and a wide range of other primary products. China supplied 16.7% of New Zealand's total imports, with the major categories being computers, telecommunications equipment, apparel and toys.

Chinese demand for New Zealand commodity exports, especially dairy products and logs, has risen rapidly in recent times and has been a major factor supporting New Zealand's commodity prices and terms of trade. China is expected to become increasingly important for New Zealand in coming years. Despite a slowdown in China's rate of growth, the country's increasing industrialisation and rapidly growing incomes will mean that it requires more of those commodities that New Zealand produces.

Australia: Australia is New Zealand's second largest trading partner after China and held the number one position prior to 2013. In the year ended September 2014, two-way merchandise trade amounted to $14.8 billion, with Australia taking 17.4% of New Zealand's exports and supplying 12.3% of imports. Australia is New Zealand's top destination for overseas investment and New Zealand's largest source of foreign investment. As at March 2014, New Zealand had $51 billion invested in Australia, while Australia had $115 billion invested in New Zealand.

Trade with Australia has flourished under CER. CER is a series of agreements and arrangements governing bilateral trade and economic relations, built on the Australia New Zealand Closer Economic Relations Trade Agreement (ANZCERTA) which took effect on 1 January 1983. Full free trade in goods was achieved on 1 July 1990, five years ahead of schedule. CER was extended to cover trade in almost all services from 1 January 1989. CER creates a market of more than 28 million people. It increases the effective size of New Zealand's domestic market more than six-fold and provides Australia with access to another market the size of Queensland.

The original ANZCERTA has been extended and added to as the relationship has developed. Other key aspects of CER now include mutual recognition of goods and occupations, a free labour market and joint agencies in certain regulatory areas.

Building on CER, successive New Zealand and Australian governments have committed to the long term goal of establishing a seamless trans-Tasman business environment - the Single Economic Market (SEM). The SEM builds on the freer trans-Tasman trading environment created by CER by addressing ‘behind the border' barriers to flows of goods, services, capital and people through a broad range of initiatives. Ongoing work to co-ordinate Australian and New Zealand business law takes place within a Memorandum of Understanding. Both sides also co-ordinate banking regulation and supervision through the Trans-Tasman Council on Banking Supervision.

New Zealand's main exports to Australia include light crude oil, gold, wine, cheese and timber, as well as a wide range of manufactured items, while New Zealand's main imports from Australia include heavier crude oils, petroleum oils, motor vehicles and aluminium oxide, as well as a range of manufactured and consumer items.

United States: The United States is New Zealand's third largest single trading partner with bilateral trade amounting to $9.7 billion in the year ended September 2014. Exports to the United States comprised 8.6% of New Zealand's total exports, and the United States supplied 11.1% of New Zealand's total imports, the major categories being aircraft and parts, medical and veterinary instruments, motor vehicles and computers. New Zealand's major exports to the United States are beef, casein, timber, lamb, cheese and a growing range of manufactured goods. The development of trade in dairy products has been constrained by long-standing quotas on these items.

Japan: Japan is New Zealand's fourth largest trading partner, with bilateral trade amounting to $6.0 billion in the year ended September 2014. Japan takes around 5.7% of total merchandise exports. Key exports to Japan include aluminium, wood, dairy products, fish, kiwifruit, meat, vegetables and other fruits.

Japan is also a major supplier of New Zealand's imports, providing 6.4% of total imports in the year to September 2014. Imports from Japan are dominated by motor vehicles, petroleum products and a vast range of technology-intensive appliances.

The Republic of Korea: The Republic of Korea is now New Zealand's fifth largest trading partner, recently overtaking the UK, with bilateral trade of $3.8 billion dollars in the year to September 2014. New Zealand and the Republic of Korea completed negotiations on a free trade agreement covering both goods and services in November 2014.

European Union: Although trade with the members of the European Union has declined in value terms, taken as a bloc the Union would be New Zealand's third largest trading partner and is an important market for exports such as sheepmeat and wine. Together, European Union members take around 10% of exports (in value terms) and provide around 18.4% of imports. Bilateral goods trade amounts to around $13.9 billion or around 14.0% of total exports and imports. Services, particularly tourism are also an important element of EU/New Zealand trade.

Other Asian Economies: Other Asian economies are taking on more importance as New Zealand's trading partners. This is providing benefits to New Zealand as the area is one of the fastest growing in the world. While most of the developed world is experiencing a gradual recovery from the GFC, Asia is providing significant demand for New Zealand's exports, especially commodities. Trade with the economies of Taiwan, Hong Kong, Malaysia, Indonesia, Singapore, Thailand, India and the Philippines is growing in importance. All are in the top 20 largest export markets for New Zealand and together account for around 13.4% of merchandise exports.

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