AUCKLAND, NEW ZEALAND – Unlike many
larger OECD countries, New Zealand did not suffer the severe
recession that hit most of its peers. Many investors and others
wondered why and this was largely due to the strict banking and
lending standards that New Zealand has in place. This regulatory
environment meant that the subprime loan market, which caused the
recession, didn't affect the country, since New Zealand had
virtually no subprime market to begin with. When a country's
banks are not making risky loans, the effects from an economic
slowdown are not nearly so severe as they inevitably must be in
other countries that do have an unsound subprime loan market.
New Zealand enjoys other financial advantages from which its
investors profit. The economy of the country is diverse. Moreover,
its central government has successfully positioned its economy as a
global leader amongst smaller nations. In the currency exchange
market, this has constantly held true. New Zealand's
comparative advantage is maintained, even as the U.S. economy
improves. Likewise, the currency has gained as well and in fact,
the currency of New Zealand is considered the second best performer
against the U.S. dollar among 16 major peers tracked by Bloomberg
in 2014, with gains approaching 4%: unlike others, such as Canada,
which suffered the biggest loss at -3.6%.
Recently, New Zealand's dollar has further benefited from a
Central Bank that in 2014 became the first in the developed world
to raise interest rates since 2011. At the same time, an economic
revival is currently in progress, boosting its currency. It is also
noteworthy that New Zealand's currency has been unaffected by
plummeting oil prices. That is largely due to the fortunate fact
that the country is not nearly as commodity-dependent and
resource-reliant as are so many others.
The land of the Kiwi has a vibrant export economy – dairy
production being its flagship export commodity. The developing
world has a thirst for increased dairy usage and New Zealand's
economy will be the beneficiary of this for many years to come. New
Zealand is also very stable politically, as well as financially,
and it enjoys one of the highest standards of living of any OECD
country. There is very little corruption and both ruling parties
are centrist in ideology. Thus, no wild policy swings can be
expected if the government changes.
Due to New Zealand's relative close proximity to Asia, too,
it has long been considered a safe haven for investors from
Asia's developed countries, particularly China and Japan. These
investors are also attracted to the country's lifestyle, with
its good schools, low crime rate and clean environment. New Zealand
in turn counts China as its largest export market, and speculation
is rife that policy- makers there will take emergency steps to
stimulate the struggling Chinese economy and in so doing give a
further boost to New Zealand's strong dollar.
New Zealand's economic success story offers investors peace
of mind, knowing that they can invest safely, and with high
confidence in their yield outpacing that of comparable investments
virtually anywhere else in the world.
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