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The economy of New Zealand, while relatively shallow in some respects, still ranks comparatively highly when ranked according to nominal gross domestic product and purchasing power. The Kiwi economy currently stands as the 53rd most powerful economy and 68th respectively. New Zealand’s global economy is largely dependent on international trade as a means to certify its stability. The country exports its agricultural goods primarily to Australia and China, but also has important trade relations with the United States, Japan, and Canada. The nation’s economic ties, trade, and currency are more closely aligned with Australia than with any other of these trading partners.
New Zealand lacks diversity in its economy as its substantial services sector accounts for more than half of the country’s gross domestic product. While the country does boast a sizeable manufacturing industry that includes metal fabrication, food processing, and aluminum production, the nation’s mining, manufacturing, electricity, gas, and water services account for more than 10% of its share in gross domestic product. A novelty in New Zealand’s economic report is the monthly dairy report, which signifies how the country’s exports will fare for the relevant financial quarter. This article will cover the financial system of New Zealand, as well as a range of market information covering currency, futures, and stocks.
show moreNZX Limited, New Zealand’s only stock exchange, is headquartered in the capital city of Auckland, North Island. In addition to being the island nation’s only equities exchange, it is also the only authorized exchange that allows futures and derivatives to be traded as well. Since its beginning in the late 1800’s, the NZX has evolved from funding the nation’s gold rush to building investor capital by supplying information and infrastructure to support investor’s needs.
New Zealand’s national currency, also known as the Kiwi or New Zealand dollar (NZD), is one of the more popularly traded currencies on the foreign exchange market. Of the top 18 currency pairs conventionally quoted by forex brokers due to overall liquidity, the Kiwi dollar takes two spots with NZD/USD and AUD/NZD.
The currency is closely correlated with the Australian dollar and also largely dependent on its own agrarian growth and agricultural industry as a whole. A unique condition of the Kiwi economy, that does not occur in other major economic reports, is its indication of financial wellbeing by the outcome of the country’s dairy export statistics. New Zealand also has a strong bond market consisting of fixed interest bonds available only to New Zealand’s residents. These quarterly paying bonds are closely tied to the value of New Zealand’s currency and is therefore a powerful indicator closely monitored by investors to determine the future strength or weakness of the New Zealand dollar.
The New Zealand dollar, signified as $, NZD, NZ$ or referred to as the Kiwi, is the circulated currency of New Zealand, the Cook Islands (named for the discoverer of the region), and Tokelau along with some other small island in the region. Inside these borders, the New Zealand dollar is usually expressed as $ but when written alongside other dollar-denominated legal tenders it is commonly written as NZ$. The New Zealand dollar is nicknamed the kiwi or kiwi dollar because the aboriginal bird is printed on the country’s coinage and currently accounts for some 2% of daily market turnover across the foreign exchange market.
Before the introduction of the New Zealand dollar in 1967, the New Zealand currency was more closely associated to the British pound. Although the British pound was the currency of the area prior to the 1930’s, New Zealand would develop its own “New Zealand pound” and circulate it for the next several decades. Despite its popularity, the pound system was perceived as overly complicated among New Zealand citizens. While the dollar system breaks down evenly into tenths, the pound is divided into 20 shillings and each shilling is further divided into 12 pence. Decimalization was proposed during the transition away from the British pound in the 1930’s but did not come into effect until the late 1960’s when the country formally adopted the decimal to the dollar system. There was some opposition to the idea as the dollar was generally perceived to represent the currency of the United States, and although alternate ideas such as the fern, zeal, or kiwi were contemplated, the dollar was formally adopted and put into circulation in 1967.
The New Zealand Stock Exchange (NZX) originated in New Zealand’s 1870s Gold Rush, when the country’s four biggest gold mines served as the financial center on the young island nation during which each mine has its own exchange. During the mid 1970’s, these individual exchanges merged together and formed the present-day entity known as the NZX but its roots in mining, metals, and raw material production still serve as a basis for the exchange’s success. The NZX’s main indexes are still pillared by these foundations but are furthered by the advancement of New Zealand’s agricultural strength.
The most profitable stocks on the exchange today accurately reflect the fundamental pillars of the Kiwi economy and thus represent the best investment options for stockbrokers and traders today. Currently, the exchange lists a total of approximately 258 companies with securities totaling a market capitalization of just under $100 billion USD.
