Chapman Tripp - Resource Library - Doing Business in New Zealand


Contents

	Introduction
	About Chapman Tripp
	Why do business in New Zealand?
	Overview
		Geography Climate People Government Legal system Currency Infrastructure Business conditions Holidays Living in New Zealand Cost of living
	Economy
		Major industries Markets Trade agreements Economic position Economic policies
	Starting up business
		Type of business Corporate structure options Branch or subsidiary? Government consents
	Immigration
		Entry requirements Temporary employment for foreign nationals New Zealand residence Immigration policy Returning residents' visa
	Buying and developing land and property
		Title Contracts for sale and purchase of land Resource Management Act and district plans The Building Act 1991 Barriers to buying land Maori land claims
	Taxation
		Overview Income tax Goods and Services Tax Import duties Rates Other taxes
	Finance
		Reserve Bank Financial institutions Financial markets Raising finance Repatriation of funds
	Regulations affecting business
		The Commerce Act The Fair Trading Act
	Intellectual property
	Labour and employment
		Employment Relations Act Working conditions

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Economy

Major industries

New Zealand has a mixed, market-driven economy, largely under the control of the private sector and heavily dependent on international trade. Historically, New Zealand’s economy has been dominated by primary sector industries, in particular the export of agricultural produce such as dairy products, meat and wool.

While agriculture is still a significant contributor to overall GDP, in recent times tourism and related industries have taken over as the largest contributor to the economy, cashing in on New Zealand’s international image as one of the world’s most beautiful countries. New Zealand has sizeable manufacturing and services sectors, employing in total over 85% of the workforce. Energy-based industries along with fishing, forestry, horticulture and mining have all expanded rapidly over the last decade, contributing to a movement away from pastoral agriculture as the dominant economic sector.

Sector	% Contribution to GDP, annual, as at June 2007
Finance, insurance and business services	26.0
Manufacturing	14.3 ^*
Community and personal services	12.2
Retail accommodation and restaurants	7.8
Wholesale Trade	7.7
Transport and communication	10.3
Agriculture	5.0
Construction	4.5
Government admin and defence	4.4
Fishing, forestry and mining	2.0
Electricity, gas & water	1.8

(Source: Gross Domestic Product by Industry; actual chain-volume series expressed in 1995/96 prices, Statistics New Zealand, June 2007).
^*Contributions from primary sector industries such as agriculture are understated as they also form significant inputs into the manufacturing sector.

Markets

Markets for New Zealand products have changed considerably over the years, from almost total reliance on Britain to purchase all exports in the 1950s, to the present spread of export markets throughout Asia/Pacific, North America, the Middle East and Europe. Similarly, the range of countries supplying goods imported into New Zealand has broadened significantly in recent times.
Main Trading Partners (year to August 2007)

Country	% of NZ Exports by Value (FOB)^*
Australia	21.1
USA	12.6
Japan	9.8
China	5.4
UK	4.8
Korea	3.8
Taiwan	2.2
Germany	2.1
Indonesia	1.9
Philippines	1.6

(^*Free on Board, includes re-exports.)
(Source: Overseas Merchandise Trade: Exports by Destination: year ended August 2007, Statistics New Zealand)

Country	% of NZ Imports by Value (VFD)^*
Australia	21.1
USA	10.3
China	13.1
Japan	9.2
Germany	4.7
Singapore	4.6
Korea	3.0
UK	2.7
Thailand	2.6
Malaysia	2.3

(^* Value for duty)
(Source: Overseas Merchandise Trade: Imports by Country of Origin: year ended August 2007, Statistics New Zealand)

Trade agreements

New Zealand is an active participant in a number of world and regional trade and economic accords. The principal agreements are:

CER
New Zealand has a special trade relationship with Australia, governed by the Australia New Zealand Closer Economic Relations Trade Agreement, known as CER. Under CER, Australia and New Zealand are committed to the progressive removal of all restrictions on trans-Tasman trade.

CER has led to Australia becoming New Zealand’s largest trading partner. Full free trade in goods was achieved in July 1990, four years ahead of schedule. Recent expansion of CER has included free trade in services, agreements to free up trade in areas such as aviation, and proposals to address taxation impediments to trade and investment.

WTO and GATT
New Zealand is a member of the Geneva-based World Trade Organisation (WTO) and a signatory to the General Agreement on Trade and Tariffs (GATT) which is included within the WTO Agreement.

New Zealand’s trade and economic policies are reviewed every six years by the WTO with the last review taking place in May 2003. The report on New Zealand’s trade policy is available on the WTO website (www.wto.org).

While the precise effect of GATT and the flow-on benefits for the economy are hard to measure, the overall estimate of Uruguay Round gains is in excess of NZ$9 billion (for the UR implementations period, 1995-2004), mostly from the agricultural sector. (Source: An assessment of the gains to New Zealand from the Uruguay Round of Trade Negotiation: Ministry of Agriculture & Forestry and Ministry of Foreign Affairs and Trade).

Members are currently in the process of negotiating another round of trade talks aimed at further liberalising world markets, raising the prospect of additional gains to New Zealand. The current timeline will see Members finalise the new agreement (commonly known as the Doha Development Agenda – DDA) at the beginning of 2005 with the first year of implementation likely to be 2006.

APEC
New Zealand is also a member of Asia Pacific Economic Co-operation (APEC). In 1994, agreement was reached to pursue free trade amongst participating APEC nations by the year 2020 at the latest.

Economic position

New Zealand’s economy is currently experiencing annual GDP growth of around 2.2% (year to June 2007), CPI inflation of around 3.0% per year (year to March 2008), relatively modest employment, and operating surpluses to meet New Zealand superannuation fund contributions, manage debt and meet capital pressures and priorities. Growth in real GDB is expected to average 3% over the 2005-2009 budget forecast period. (Source: Budget 2005 Economic Outlook).

New Zealand’s open economy sees it exposed to fluctuations in larger markets with which we trade. The 1997 US economic crisis affected the growth and export receipts. But indications are that the underlying structure of the economy remains sound following a period of dramatic restructuring by successive governments since 1984.

Before restructuring, much of New Zealand’s economy was insulated from marketplace realities through the widespread use of subsidies and import controls which served to shelter largely inefficient New Zealand industries. These protections, coupled with comparatively high government spending in social areas, resulted in significant budget deficits and the need for substantial borrowing to make up the shortfall.

Moves since 1984 to free up the economy have included floating the New Zealand dollar, privatising or corporatising many state-owned industries, progressively removing subsidies and import restrictions, de-regulating the labour market, and repaying long-term debt. Following a period of transition, real benefits are now emerging, with New Zealand boasting one of the least regulated and most internationally competitive economies in the Asia Pacific region.

Economic policies

The thrust of Government economic policy in recent times has been to reduce inflation, control state spending, cut public debt and generally strengthen the fundamentals of the New Zealand economy. Sustainable economic growth is a key focus for the Government with the fiscal strategy remaining focussed on preparing for the future fiscal costs associated with an ageing population.

Price stability
The Reserve Bank Act was passed in 1990 making the Reserve Bank independent from government and setting a target of 0-2% underlying inflation by December 1992. This target was comfortably achieved and the Reserve Bank has subsequently been successful in maintaining underlying inflation at below 3%.

Repayment of debt
The Fiscal Responsibility Act 1994 commits the Government to achieve and maintain “prudent” levels of public debt.

The Government’s stated long-term fiscal objective is to manage debt at prudent levels and maintain gross sovereign-issued debt at around 20% of GDP over the next 10 years. (Source: Fiscal Strategy Report, May 2006).

(^* Sovereign-issued debt is debt issued by the New Zealand DMO and Reserve Bank. It excludes debt issued by SOEs and Crown entities. It includes NZ Government stock held by the NZS Fund, Government Superannuation Fund, Earthquake Commission & Accident Compensation Corporation).

New Zealand’s government debt is now low in historical and also in international terms. Lower levels of government debt have reduced the need to react sharply to shocks and lowered the risk premium in interest rates.

The Government remains committed to ensuring that total government revenue does not exceed total government expenditure over a reasonable period of time.