Expanding export markets remain a key focus for New Zealand businesses in 2018, as overseas demand for kiwi produce continues to grow. As a result, 42.8 per cent of businesses plan to increase their capital expenditure budgets over the next 12 months, according to the Maia Financial New Zealand Equipment Demand Index (the Index).
Businesses planning to increase their capex expect to spend an additional 22.0 per cent on average; a figure which indicates significant positive sentiment about the economic outlook, locally and internationally which sees many focusing on export.
It’s helped that newly elected Prime Minister Jacinda Ardern has thrown her support behind a revised free trade agreement, which is expected to open new markets in Japan, Mexico, Peru and Canada, and level the playing field for Kiwi businesses in Asia Pacific and the EU. A revised agreement would be particularly important for manufacturers and those in agriculture considering the high demand for kiwi produce and help increase the ability for manufacturers to contend with their overseas competitors.
New Zealand’s economy has been a stellar performer of late among OECD nations and that looks set to continue, with a forecast of growth in excess of 3.0 per cent in 2018-19. By contrast, Australia is forecast to experience growth of 2.92 per cent over the same period.
Spearheading the drive towards smarter factories and smarter farms
The country’s healthy economy looks set to result in significant capital investment in Industry 4.0 technology – particularly in agriculture and manufacturing – propelling a collective push towards so-called ‘smart factories’.
Automation is a key focus for manufacturers with 21.4 per cent of businesses intending to implement some form of automation this quarter, almost double from this time last year. A further 14.8 per cent are looking to acquire big data services, a product which will prove imperative for manufacturers to have as machines learn from their own working tasks and begin to communicate and learn from other machinery.
As for agriculture, both ground and airborne drones are becoming more widely used to manage crops, provide soil analysis and monitor plant health. Index research has found that 15.0 per cent of businesses intend to acquire drones, up from 5.3 per cent in March
With such major shifts in business sentiment towards new technology, especially over a relatively short period of time, businesses are becoming quick to adapt, which will not only increase the value of the local economy through export but internationally as well. For those who are not so quick, could find it difficult to grow in the future and compete locally and internationally.
Expanding business, expanding export
The latest edition of the Index, New Year, New Growth, has found that almost a third of businesses are in ‘expansion mode’ with 26.6 per cent citing ‘confidence in our business and the economy’ as their reason for upping spend.
This comes as positive news, particularly as 71.2 per cent of businesses in our previous edition, Business Gets Political, expressed concerns with the impact the new change of government would have on their operations and ability to grow.
Agricultural enterprises are bullish about their prospects, with 47.3 per cent expecting to increase their capex budgets by 24.0 per cent. This is in line with the significant export opportunities the sector is enjoying, particularly in the chilled and processed food markets, courtesy of growing demand from our neighbours in the Asia Pacific region. Export of food produce can only see positive gains so far.
Businesses in the accommodation and hospitality sectors are also set to invest more, with 57.1 per cent planning capex spending increases, off the back of healthy growth in the tourism sector. Total tourism expenditure was $34.7 billion in the year ending March 2016, up more than 12.0 per cent on the previous year.
Where some industries appear to be thriving, other sectors are not as confident and remain cautious around their spending and asset base. Within the retail sector, only 29.4 per cent of businesses intend to increase their capex spending, the lowest of all the industries mentioned in the Index.
Overall, the picture is one of well-founded confidence, not only in the local and international economy, but in transforming their businesses.
Should a revamped Trans Pacific Partnership (TPP) come to fruition, this could provide a fillip to the economy and revolutionise the way businesses operate across the country.
For more information on business sentiment and acquisitions, download your copy of the latest Equipment Demand Index from our website.
In addition to the Equipment Demand Index, we have released a special technology edition of the Equipment Demand Index – Index Insights: New Zealand and the Industry 4.0 Era, which is now available to download.