Assessing the damage in our major markets

Australia

Top-line statistics from Australia – our largest and closest export market – are dire. Most forecasters pick 2009 GDP growth at somewhere between positive 0.2 percent and minus 0.2 percent.

Tim Green, New Zealand Trade and Enterprise’s (NZTE) regional director, Australia and the Pacific, sums it up as low, slow or no growth.

Unemployment is expected to hit 7 percent or 8percent by the end of this calendar year. The mining boom is clearly over, and commodity prices have fallen away significantly – admittedly from an unusual high.

In response, the Australian government has unleashed an $A84.3 billion stimulus package. This includes fast-tracking $A22 billion-worth of infrastructure spending that had already been flagged.

On top of that, there is also state government spending “which in some cases is fairly substantial,” says Green.

He predicts Kiwi companies will face increased competition from Australian firms brushing up their operations on their own turf.

“The downturn heightens the importance of getting the right strategy and business model in Australia. A lot of New Zealand companies underestimate the differences in the markets and how hard it might be to get established in Australia.

You need to invest time in cracking the networks over there. You need to think about Australia as a series of different state or city markets rather than just one market.”

Green says there will be opportunities in infrastructure (especially construction around residential housing), healthcare (both software and construction), defence and security, tourism, and some retail niches for food and beverage suppliers.

Don’t just look at the headlines, he says.

Even in shrinking sectors, there will be opportunities.

“So it’s all the more important to be on the ground getting good market intelligence right now.” 

The US

In the US, the epicentre of the current world economic downturn, there have been around 2 million home foreclosures. That’s around 3 percent of the total national housing stock. Expect these figures to get worse before they get better.

Unemployment is shooting through the 8percent barrier, on its way to 9percent or even 10 percent. And those consumers with money have reined in their spending.

That’s just three ways to measure the stress on the US economy. The $US775 billion Obama  stimulus package aims to help ease the pain. The money will be divided roughly equally into three broad areas – tax breaks, government spending and investment.

Peter Bull, NZTE’s regional director Americas, says key investments into areas such as infrastructure, education and training, energy, health and law enforcement are all potential opportunities for New Zealand firms.

“But, overall, New Zealand exporters have to be extremely cautious and careful. Most importantly, you have to be well planned.”

Bull says smart firms are rethinking their approaches.