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Economic Implications of the New Zealand Election

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by Arthur Kyriakopoulos
Sep 17 2020

There is one month to go in the New Zealand election race, which is expected to return the Labour Party to government, and deliver a second term for Prime Minister Jacinda Ardern.

A continuation of Labour policies is expected to create opportunities for the Agribusiness, Road and Bridge Construction and School Education industries. Other industries including Oil and Gas Extraction and Coal Mining will likely be hindered by a second Labour term.

Key Labour Policies

Labour has introduced several signature policies over the past three years, including a ban on new offshore exploration in the Oil and Gas Extraction industry, KiwiBuild in the House Construction industry, and the Wellbeing Budget.

The Labour Party’s recently announced policies provide a glimpse of what New Zealand would look like under a second Ardern term.

‘Labour has made most apprenticeships free, and is set to fund 8,000 new and transitional homes, which will support the construction sector. Labour also plans to back New Zealand’s primary sector, hoping to generate an additional $44 billion in export earnings,’ said IBISWorld Senior Industry Analyst, Arthur Kyriakopoulos.

Labour’s Fit for a Better World Roadmap, released in July 2020, outlines a 10-year plan to almost double the current value of the primary sector, with a particularly strong focus on the Agribusiness industry. Agribusiness currently employs 211,000 people in New Zealand, and is expected to generate $114.4 billion in revenue in 2025-26. The plan identifies several key industries that are likely to receive greater government focus, including Fishing and Aquaculture.

‘Labour is projected to invest in wharf and hatchery infrastructure, enabling the industry to grow at an annualised 2.6% over the five years through 2025-26, to total $1.7 billion,’ said Mr Kyriakopoulos.

Other industries set to be a focus of the 10-year plan include:

Ardern’s team also plans to improve New Zealand’s transport system, promising to invest $6.8 billion across transport projects, which is likely to improve major road networks. The Road and Bridge Construction industry is forecast to grow at an annualised 4.0% over the five years through 2025-26, to total $10.0 billion. The Rail Transport industry is also anticipated to receive a boost, following investment in new rail track and locomotives. Rail transport is expected to generate $457.4 million in revenue in 2020-21, and provide 3,700 jobs.

Key National Policies

Although Labour is forecast to win the upcoming election, industries should also be prepared for key economic policies offered by the National Party.

Small business is a major focus of the Nationals, with various support methods included in their Small Business Package. These include capital investment allowances of up to $30,000 for new businesses and $10,000 cash grants for small businesses for each new employee they hire.

The Nationals have promised to invest $31 billion to upgrade transport networks and improve infrastructure in the School Education and Hospitals industries. Funding includes spending of $4.8 billion on 60 new schools and other facilities over the next decade, to meet demand for an estimated extra 100,000 students.

The National Party is also committed to supporting tourism operators, which have been devastated by the COVID-19 crisis. The party’s proposed Tourism Accelerator is set to provide a $100 million package through direct grants to tourism providers, and boost investment and growth in the Tourism industry. Tourism revenue in New Zealand is expected to decline by 26.3% in 2020-21, to $30.8 billion.

‘Tourism revenue is projected to grow at an annualised 6.8% over the five years through 2025-26, as border closures are eased. The industry is expected to employ over 229,000 people over the period,’ said Mr Kyriakopoulos.

Where will growth come from?

Regardless of the election result, the New Zealand economy is projected to post a strong recovery over the next five years. Strong support for construction projects is anticipated to drive this growth, particularly in the Heavy Industry and Other Non-Building Construction industry, with revenue forecast to grow at an annualised 2.8% over the five years through 2025-26, to $5.2 billion.

‘As the COVID-19 crisis is managed and brought under control, GDP is forecast to grow at a compound annual rate of 2.5% over the next five years, to reach $278.3 billion in 2025-26. Real household discretionary income is also expected to make a strong recovery,’ said Mr Kyriakopoulos.

A recovery in consumer sentiment and business confidence is expected to drive GDP growth. Both measurements are projected to bounce back strongly once COVID-19 is contained, increasing spending from consumers and investment from businesses. This trend is reflected in forecast growth in household consumption expenditure at an annualised 3.7% over the five years through 2025-26, to hit $170.8 billion, and private capital expenditure rising at an annualised 4.7% over the same period to $56.2 billion.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647

Email: mediarelations@ibisworld.com