New Zealand is Australia’s closest neighbour and Australian companies are the largest investors in New Zealand. Australia and New Zealand have a comprehensive Free Trade Agreement (FTA) along with increasingly harmonised financial and regulatory systems, and similar consumer markets. This makes New Zealand a highly attractive market for Australian companies wishing to export their products or services.
New Zealand is a good market for Australian companies to gain experience in exporting. This is mainly because a considerable number of barriers are removed given the geographical and cultural closeness. For those on the eastern seaboard of Australia, New Zealand is only three hours away, which makes it closer than Perth. Some companies would rather export to New Zealand than develop the market in Perth.
On the downside, the New Zealand market is small, with a population 20 percent of that of Australia and is relatively saturated with Australian products and services—although this won’t be an issue for new offerings. Also, because the population is dispersed, internal distribution costs could potentially be higher.
Austrade’s office in Auckland is responsible for assisting many companies in entering the New Zealand marketplace, and they have a few tips for aspiring exporters:
• be prepared with your export price list and shipping costs
• don’t assume you know the market—it may be similar, but it is not the same as Australia and assumptions can upset potential business prospects
• avoid large minimum order quantities—New Zealand may be a great market, but it is one-fifth the size of Australia
• treat potential partners with respect
• don’t go silent on your return from a visit, and never play
hard to get.
Making It Work
As with all markets, any product or service that is to succeed in New Zealand must have a distinct competitive advantage. This may be in the form of a unique product feature, price, style, or, better still, a combination of these. Due to the AUD/NZD exchange rate being in the positive, Australian products have a disadvantage in pricing which means they do need to be extra competitive or unique in other areas when competing with local products.
A proactive, eager exporter will generally have more success than someone who sits back and waits for opportunities, and New Zealand is no different. In most cases, it will be to your advantage to follow up any leads, and don’t wait for the importer to initiate action or do all the work. A market visit also helps to develop a relationship with the buyer. A market visit can be as short as one day, with minimal disruption to small Australian businesses.
There are unique advantages to entering this market. The main ones centre around the closeness of the two nations. By being geographically close, freight costs are lower than to other markets. Our cultural closeness comes from our history and long-standing trans-Tasman allegiances with migration, trade, and defence ties shaping a close and cooperative relationship over the last two centuries. Thousands of Australians and New Zealanders cross the Tasman each year as tourists or for business purposes. Some 350,000 New Zealanders live in Australia, and around 60,000 Australians live in New Zealand.
Although great rivals on the sporting field, Australia and New Zealand have joined together many times as business partners. The long-standing agreement for Closer Economic Relations (CER), signed in 1983, created one of the world’s most open and successful FTAs, allowing for duty-free trade between the two countries. Although a huge success, there are still areas of common finance and investment regulatory frameworks to be implemented.
Many technical standards are now common using the AS.NZS standard.
The CER contains no specific provisions for investment. However, New Zealand has agreed to investigate the possibility of including an investment component to the CER agreement.
One change for businesses exporting product is that both countries have agreed to change the basis for determining the Rules of Origin (ROO) under the CER agreement. A Change of Tariff Classification (CTC) approach will replace the current ex-factory cost approach. Under CTC, imports that are not ‘wholly originating’ in either Australia or New Zealand are required to undergo a specified change in tariff classification. The CTC method is used in Australia’s FTA with the US and Thailand.
Like Australia, New Zealand is establishing FTAs with a number of countries, which will increase the competition in each market. New Zealand currently has an FTA with Canada and Thailand, and a multi-party agreement—the Trans-Pacific Strategic Economic Partnership—which links New Zealand with Chile, Singapore and Brunei, liberalising trade between the four countries.
Any company considering the New Zealand market for their products should act sooner rather than later.
Fact File:
• Population just over 4 million with 30 percent living in the
Auckland region
• Over three quarters of New Zealanders live in urban areas
• Auckland (around 1.3 million) is the largest city followed by Canterbury (just over 500,000)
• Land area is around the same as Victoria and Tasmania combined
• By 2026, the North Island will be home to 78 percent of
New Zealanders
• Half the population is over 35 years old
• 12 percent of the population is aged 65 years and over
• New Zealand’s population will continue to age with one in four
New Zealanders aged 65 years and over in 2051, compared with one in eight in 2004
• New Zealand is Australia’s largest export destination (by number
of exporters)
• New Zealand is the fourth largest export market (by dollars) with exports of around AU$7.9bn plus AU$2.4bn in services exports
• Top 5 imports are vehicles, parts and accessories (NZ$5,524m); mechanical machinery and equipment (NZ$4,928m); petroleum and products (NZ$3,799m); electrical machinery and equipment (NZ$3,271m); textiles and textile articles (NZ$1,649m)
• Top import countries are: Australia (NZ$7,929m), Japan (NZ$3,921m), US (NZ$3,749m), China (NZ$3,553m), Germany (NZ$1,837m)
Case Study
On Yer Bike
It’s a huge feat: operating your own business from home part-time, and then getting into the export market. But Ian Bartrop has done it, though not without some tough challenges.
During the day, Bartrop works as a quantity surveyor and estimator on the NSW mid-north coast. About six years ago when cleaning his motorbike, he got sick of having to wheel it up and down the driveway trying to clean its wheels. He researched the market and found that bike lifts were quite expensive. So, he set about designing his own: the IB Bike Lift. With a manufacturing background, he was able to manufacture them himself, and soon started selling the bike lifts to what he describes as a tiny Australian market.
Popularity for the product grew. Despite being pessimistic about a one-man business’ ability to export, Bartrop started looking at the New Zealand market in 2002, after being told it was the easiest and least expensive overseas market to begin with.
“I went over to New Zealand, hired a car and drove around to bike shops to show them my products,” he explains. It was difficult to get people to actually talk to him, and the ones who did said costing would be a big problem because the New Zealand dollar wasn’t as strong as the Australian dollar, not to mention freighting costs on top of that.
“The first time I went over there, there was a bit of interest. After that, somebody told me about Austrade and so I made
inquiries. They were very helpful and put me in touch with someone over there who basically rang up the people I’d already visited, and got behind the product and made appointments. So I went back to talk to people and it turned out that the first people I’d contacted took me on. They ordered five initially, and two of those were sent to New Caledonia.”
Business in New Zealand and New Caledonia has grown from there, although these are still tiny markets and so Bartrop is currently tackling the US market. This is problematic given the
long distance and expense to travel to the US to source new clients, but he says it could be rewarding because of the sheer size of the market.
Bartrop says the biggest problem for him as a sole operator has been the time and cost of exporting as well as only being able to work on the business part-time. “If I concentrated solely on the bike lifts, I’d be doing a lot better.”
And, despite the help of Austrade, he adds, their service still comes at a cost after the first 20 hours of assistance, on which you can claim a rebate. But this is not without its problems for Bartrop, who is finding it problematic to claim a rebate on Austrade’s assistance in New Zealand because their close ties with Australia means this isn’t covered by the rebate. “It’s a good system but it’s advisable to read all the rules and regulations first, which I didn’t,” he says.
While the export road hasn’t been—and still isn’t—smooth sailing, Bartrop’s enjoying the experience and is excited about getting the next batch of 200 bike lifts out the (garage) door.
—Rebecca Spicer
* Craig Malcolm is a TradeStart export adviser with the Australian Industry Group, working with new exporters to help them get into the export market.
