Global trade war 'bad news for NZ'
A global trade war beckons, which is bad news for a small open economy like New Zealand, warns Mark Smith ASB senior economist.
New Zealand commodity prices are likely to feel downward pressure over the year, says ASB senior rural economist Nathan Penny.
In his Commodities Weekly report, Penny says 2019’s more modest outlook follows relatively positive prices over 2018.
The average level over 2018 was comfortably above the 10-year average in both USD (+4.7%) and NZD (+12.3%) terms.
However, economic growth in NZ’s major export market, China, is slowing, and Penny expects this slowing to lead to more modest demand for NZ’s commodities.
“Recall that China accounts for around a fifth of NZ’s overall goods exports and larger amounts for the log, dairy and sheepmeat sectors,” he says.
Moreover, NZ agricultural production is booming, with the extra supply also weighing on commodity prices.
Penny notes that in particular, spring 2018 weather was surprisingly good and the weather has continued in this vein so far this summer. As a result, agricultural production is likely to remain firm over coming months.
“For example, we expect record-high dairy production this season. Indeed with the bumper dairy production in mind, we revised down our 2018/19 milk price forecast twice late last year.”
Meanwhile, the global economy is also slowing, hinting at a broader slowing in demand for NZ export commodities. In the US, the trade tensions with China combined with rising interest rates are causing financial market volatility. While over the Atlantic, ongoing Brexit concerns are weighing on the UK and European economies.
Despite these headwinds, there are positive offsets in play, says Penny.
“First up, the NZ dollar is at a supportive level and likely to mostly stay that way over 2019. As a result, commodity prices in NZD terms, if not USD terms, are still likely to remain above long-term averages.
“Also, while overall Chinese economic growth is slowing, we expect the household sector to hold up better than the industrial and export sectors.”
Federated Farmers supports a review of the current genetic technology legislation but insists that a farmer’s right to either choose or reject it must be protected.
New Zealand’s top business leaders are urging the US Administration to review “unjustified and discriminatory tariffs” imposed on Kiwi exporters.
New tariffs imposed by President Donald Trump signal an uncertain future, but New Zealand farmers know how to adapt to changing conditions, says Auriga Martin, chief executive of Farm Focus.
A global trade war beckons, which is bad news for a small open economy like New Zealand, warns Mark Smith ASB senior economist.
Carterton's Awakare Farm has long stood as a place where family, tradition and innovation intersect.
Fonterra says the US continues to be an important market for New Zealand dairy and the co-op.
OPINION: At last, a serious effort to better connect farmers and scientists.
OPINION: If you believe Maori Party president John Tamihere’s claim that “nothing dodgy” occurred at Manurewa Marae during the last…