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The one thing NZ is lacking

[OPINION] The head of think tank, The NZ Initiative, gives his view on the state of the Australian and New Zealand economies.

Tuesday, February 25th 2014, 12:45PM

by Oliver Hartwich

The Kiwis hardly needed cheering up from me. New Zealand is performing so strongly that some analysts have started referring to us as the “rock star” of the world economy. For the Australians, it was a different story. Not only is their mining boom levelling out, they also find themselves outperformed by us, which probably hurts even more.However, in my view there are enough reasons for optimism on both sides of the Tasman. Both Australia and New Zealand are ideally placed to benefit from the changes in the world economy.

The mega story of the 21st century is the rise of the Asian middle class. Over the next 25 years, the global middle class will grow by about 2 billion people. This rise is almost entirely driven by Asian countries and it will drive demand for Australian and New Zealand exports.

The Australians noticed this surging demand earlier than New Zealand because their primary exports are coal, iron ore and other minerals – hard commodities that are required early on in the process of industrialisation. New Zealand’s soft commodities from our agricultural sector are in greater demand as Asia’s economies shift their focus from investment to consumption. This shift is also evident in a slight dip in Australia’s terms-of-trade while New Zealand is currently seeing terms-of-trade at a 40-year high.

Both Australia and New Zealand will continue to enjoy prices for their exports that are much above their historical averages. Entering free trade agreements with Asian countries will further boost export income, as did the free trade agreement New Zealand signed with China in 2008. It has since more than quadrupled our exports to China as a percentage of GDP.

We are also well placed to take part in Asia’s boom for structural and domestic reasons. No matter which factors you measure – economic freedom, freedom from corruption, economic competitiveness – Australia and New Zealand typically appear in the global top 20.

With our sound institutions and our growing integration into the Asia-Pacific economic region, if any countries are able to grow, they are New Zealand and Australia.

However, there is one thing we are lacking, and that is self-awareness. We often forget how lucky we are. And we sometimes forget that even the best conditions should never make us complacent but encourage us to become better still.

Dr Oliver Hartwich is the Executive Director at think-tank, The NZ Initiative.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 ▼6.79 ▼6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 ▼7.29 ▼7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 ▼6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 ▼7.39 ▼7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.30 7.89 7.69
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.30 8.89 8.69
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 ▼6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 7.15 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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