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Service Industries

New Zealand's service industries, which collectively account for around two-thirds of GDP, are relatively broad-based across a wide range of activities. The largest contributions to overall services activity are from retail and wholesale trade (18% of services GDP), rental and real-estate services (18%) and professional and administrative services (15%). Other significant services activities include education, health, information technology and financial services, as well as postal services, transportation and warehousing.

As the New Zealand economy entered recession in 2008, services growth slowed, but not to the extent of other sectors. With the sector expanding at a more rapid rate than other areas of the economy over the past decade, its share of GDP has increased from 62% in 2004 to 66% in 2015. Export-related activities such as tourism and primary sector services inputs play an important part in trends in this sector.

Services constituted around 72% of total employment in the economy in the year to September 2015. Growth in services employment has been reasonably broad across most industries over the past decade; the services sectors that experienced the strongest employment growth in 2015 were retail trade, accommodation and food services.

Infrastructure

In 2009, the Government established a National Infrastructure Unit within the Treasury to take a national overview of infrastructure priorities by providing cross-government coordination, planning and expertise. The Unit develops its policy advice in conjunction with an Advisory Board made up of a mix of private and public sector expertise.

The Unit is also responsible for promulgating robust and reliable cross-government frameworks for infrastructure project appraisal and capital asset management and for monitoring the implementation and use of these frameworks. As part of this work, the Unit has released Private Public Partnership (PPP) guidelines for use by government agencies and provides ongoing support for agencies and departments involved in PPPs.

In August 2015 the Unit released the third National Infrastructure Plan, which seeks to provide a common direction for the planning, funding, building and use of all economic and social infrastructure. It covers the transport, telecommunications, energy, water and social infrastructure sectors. The purpose of the Plan is to improve investment certainty for businesses by increasing confidence in current and future infrastructure provision. Through the Plan, the Government aims to achieve better use of existing infrastructure and better allocation of new investment.

Further information is available at http://www.infrastructure.govt.nz

Transport

Transport is a major enabling component for economic activity in New Zealand. The country's transport system owes its characteristics, not only to New Zealand's dependence on external trade and remoteness from many of its trading partners, but also to its rugged terrain and scattered population and the division of the country into two main islands spanning 2,011 kilometres in length. As a result, the establishment of a comprehensive network of roads (around 93,000 kilometres) and railways (4,000 kilometres) linked to ports and airports has involved capital costs that are high in relation to the size of the population. However, the efficiency of the country's internal transport system has played a critical role in New Zealand's economic growth.

Much of this transport infrastructure was originally developed and operated by government-owned monopolies. Today, the transport sector is largely deregulated and legislative barriers to competition have been removed. Many previously government-owned operations are now privately owned.

Roading: The allocation of funding and the management of state highway works are managed by a Crown entity, the New Zealand Transport Agency. Construction and maintenance work is contracted to private sector companies.

Land transport infrastructure and its maintenance are funded primarily from distance-based charges for diesel vehicles, excise duties on petrol and motor vehicle registration charges. More recently, the Government has appropriated additional funding to accelerate the construction of new roads and the provision of public transport.

Tolling schemes for new highways are permitted where this is deemed an appropriate funding arrangement. The capital for these schemes can come from either the public funding body, or from private providers in partnership with the Government.

Railways: New Zealand's railway system connects all major population centres and includes rail ferries between the North and South Islands. The system was maintained and operated under government ownership until 1993, when it was privatised. The Government has since purchased back both the network infrastructure and rail services. The national rail system operates as KiwiRail and is predominantly used for transporting freight.

KiwiRail contracts with its customers on commercial terms but also receives funding from the Government, which funds a portion of the costs of maintaining and renewing the national rail network.

While the Government, through KiwiRail, owns most rail infrastructure and rolling stock, Auckland and Wellington regional authorities also own some rolling stock, which is used by contracted providers of metropolitan rail services. Over the past eight years, significant investment has been made in both metropolitan networks to upgrade, extend and electrify services.

Shipping: Ninety-nine percent of New Zealand's total international trade by volume is carried by sea, with around 30 global and regional shipping lines calling at New Zealand ports. Coastal shipping services, operated by both local and international shipping companies, provide intra- and inter-island links and play a key role in the distribution of bulk cargoes such as petroleum products and cement.

Port companies established under the Port Companies Act 1988 operate 13 of New Zealand's 14 commercial ports. These companies operate at arm's length from their predominantly local authority owners, with a few partly privatised and listed on the New Zealand Stock Exchange.

New Zealand's shipping policy reflects the philosophy that the country's interests are best served by being a ship-using rather than a ship-operating nation. The policy seeks to ensure for New Zealand exporters and shippers unrestricted access to the carrier of their choice and to the benefits of fair competition among carriers.

The Maritime Transport Act 1994 regulates ship safety, maritime liability and marine environmental protection.

Civil aviation: New Zealand is one of the most aviation-oriented nations in the world. In a population of just over 4.5 million there are over 10,000 licensed pilots and more than 4,700 aircraft. Light aircraft, including helicopters, are used extensively in agriculture, forestry and tourism.

New Zealand allows up to 100% foreign ownership of domestic airlines and there is no domestic air services licensing. Air New Zealand is the major domestic operator on main trunk and regional routes. Jetstar provides competition on main trunk routes and a small number of regional routes.

New Zealand has around 70 formal air services agreements with foreign governments. The Government's international air transport policy released in 2012 is to seek opportunities for New Zealand-based and foreign airlines to provide their customers with improved connectivity to the rest of the world and to facilitate increased trade in goods and services. This is done by pursuing a policy of putting in place reciprocal "open skies" agreements, except where this would not be in the best interests of the country as a whole.

Currently, around 19 international airlines, including Air New Zealand, link New Zealand with the rest of the world through their freight and passenger services.

International flights operate from a number of international airports, of which Auckland, Wellington and Christchurch are the most significant. Queenstown and Dunedin are secondary airports used for some trans-Tasman flights. The three major international airports (Auckland, Wellington and Christchurch) are owned by public companies.

Air New Zealand is a publicly listed company on the New Zealand Stock Exchange. In 2001, the Government purchased shares in the company following a period of difficult business and financial events for the airline. In 2013, the Government divested around 20% of its shares to retain 53% ownership. Since 2001, Air New Zealand has restructured its operations and has restored its balance sheet to a sound financial position. The airline has also made profits in each financial year and is engaged in a fleet replacement programme which is expected to be completed by 2016.

Tourism

Tourism is one of the largest single sources of foreign-exchange revenue and a major growth industry in New Zealand. In the year to March 2015, international tourist expenditure in New Zealand amounted to $11.6 billion, an increase of 17.1% on the previous year. The country's beautiful scenery, natural environment and a range of outdoor activities make New Zealand a popular tourist destination.

Total visitor arrivals for the year ended October 2015 totalled 3,059,449, an increase of 8.6% over the previous year.

Australia is New Zealand's closest market and the largest source of visitor arrivals at just over 1,207,040 (39.5% of the total) in the year ended October 2015. Australian arrivals were up by 5.5% from a year earlier. The next largest markets are China (306,880 or 10.0% of the total) and the US (193,616; 7.0%). Visitor arrivals from a number of Asian markets have also grown strongly over the past decade.

Tourism arrivals are sensitive to the New Zealand dollar exchange rate. The New Zealand dollar has depreciated in trade-weighted terms over 2015, and a further gradual depreciation against the US dollar is likely.

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