Record Dairy Prices, $10B Milk Export to China Boost NZ Economy, While Australia’s Limps
By Vittorio Hernandez | February 3, 2014 10:38 AM EST
Fonterra and China's milk industry (Reuters).
YouTube/The Best Finance
Neighbours Down Under Australia and New Zealand are currently studies in contrast, insofar as their economies are concerned.
While New Zealand, the smaller of the two economies, is growing dynamically and has been described as the Rock Star of the Organisation for Economic Co-operation and Development, Australia's economic is limping.
While Australia survived the 2008 global financial crisis unscathed, New Zealand suffered from 18 months of recession, followed by a very strong tremor that leveled the second largest city of Christchurch in 2011.
However, 2014 is the turning point for New Zealand which is riding high on healthy dairy prices, its currency almost at parity with the Australian dollar and a construction and jobs boom as the country emerges from the earthquake ruins.
A boon to New Zealand is China, which just months ago banned milk exports from New Zealand over the botulism scare in Fonterra. China is New Zealand's top export markets for milk worth $10 billion, a 45 per cent jump from 2013 level.
As a result, New Zealand enjoyed a trade surplus of $523 million in December, mainly due to larger volume of milk exports to China, primarily milk powder.
For the same year, New Zealand's exports to Australia - which used to be its top market - went down about 8 per cent of $775 million as sales of cure oil went down, so yearly exports to Oz has returned to $9.1 billion.
Saul Eslake, chief economist at Bank of America Merrill Lynch, warned that the limp of the Australian economy is expected to continue as its mining export boom winds down, while its dairy production has contracted in the past 10 years due to drought and high wages.
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