Media Release
2017

21 August

Mid-year review:
IBISWorld reveals New Zealand’s industries set to fly and fall into
2017-18
Across more than 200 New Zealand industries – from agriculture, forestry and fishing to mining,
manufacturing, retail trade, transport, training and many more – IBISWorld analysts have researched
and identified the top five Kiwi industries set to perform well, and those set to disappoint, over the
course of the 2017-18 financial year.
“The New Zealand economy has undergone a revolution over the last decade or so. Its increasingly
diverse economy no longer relies solely on the primary industries that once dominated the economy,
and this year’s list of industries set to fly and fall reflects that,” said Mr Nathan Cloutman, IBISWorld
Senior Industry Analyst.
“Buoyed by open immigration policies, a growing population and strong exports, New Zealand is
cementing itself as an increasingly important trading partner in the Asia-Pacific, and globally,” added
Mr Cloutman.

Industry
Multi-Unit Apartment and Townhouse
Construction
Geothermal, Wind and Other Electricity
Generation
Cheese, Butter and Milk Powder
Manufacturing
Superannuation Funds
Aged Care Residential Services
Postal and Courier Pick-up and Delivery
Services
Television Broadcasting
Rail Transport
Fossil Fuel Electricity Generation
Gas Supply
*Currency used is the New Zealand Dollar
**New Zealand financial year

2016-17**
($ million)

2017-18**
($ million)

Annual growth
2017-2018 %

1,299.1

1,418.9

9.2%

398.4

432.7

8.6%

16,073.9
11,512.5
2,833.7

17,190.5
12,252.4
2,975.0

6.9%
6.4%
5.0%

2,478.8
1,563.3
425.0
322.3
594.2

2,424.3
1,484.9
403.4
303.4
557.1

-2.2%
-5.0%
-5.1%
-5.9%
-6.2%

Analysis from IBISWorld on what is affecting the performance of these industries follows:

Industries set to fly in 2017-18
Multi-Unit Apartment and Townhouse Construction
New Zealand is in the midst of an apartment construction boom at the moment, with the Multi-Unit
Apartment and Townhouse Construction industry expected to rise by 9.2% in 2017-18, according to
IBISWorld.
“A low interest rate environment has driven significant demand for apartments and townhouses and
this is expected to persist over the current year. Building consents issued for new homes reached a

 12-year high in 2016-17 and growth is anticipated to continue over the current year due to a housing
supply shortfall,” said Mr Cloutman.
Surging residential housing prices in Auckland and Wellington have also led to a shift towards more
affordable higher density living, particularly for those seeking to enter the property market for the
first time. This has also fuelled demand for apartments and townhouses.

Geothermal, Wind and Other Electricity Generation
The Geothermal, Wind and Other Electricity Generation industry is expected to grow by 8.6% in
2017-18, to $432.7 million, according to IBISWorld.
“A structural shift towards renewable energy sources has been driven largely by the cost
effectiveness of wind and geothermal generation assets. New Zealand is well suited for the
production of geothermal energy and its position between the latitudes of 40 and 50 degrees puts it
in an area with strong winds, providing some ideal locations for wind farms,” said Mr Cloutman.
Over the past decade, companies have sought to divest their fossil fuel assets in favour of renewable
sources with higher profit margins. Geothermal energy has proven to have lower operating costs
than coal-fired electricity generation and lower capital requirements than hydro-electricity
generation, IBISWorld research suggests.
“The industry’s green credentials and New Zealand’s natural resources make geothermal and wind
power highly competitive substitutes to more established forms of electricity generation which, by
2022-23, is expected to generate revenue of $543.7 million,” added Mr Cloutman.
Cheese, Butter and Milk Powder Manufacturing
New Zealand’s producers of cheese, butter and milk powder are heavily export oriented, with almost
three-quarters of revenue derived from global markets, according to IBISWorld research.
“The industry is highly exposed to changes in global demand and supply of dairy products, and the
price movements that result from these changes,” said Mr Cloutman.
Global dairy prices have increased from their mid-2015 low, when global producers increased
production in response to high prices in the previous year. This caused a global dairy product supply
glut, which depressed prices through 2015-16. As demand and supply have since come closer to
equilibrium, global dairy prices have risen. This rise is expected to continue through 2017-18,
boosting revenue for cheese, butter and milk powder manufacturers by a projected 6.9%.
“A forecast increase in the domestic price of milk is anticipated to contribute marginally to this
trend,” added Mr Cloutman.
Superannuation Funds
A combination of stronger contributions and investment returns is expected to support continued
growth in the burgeoning Superannuation Funds industry over 2017-18. IBISWorld expects industry
revenue to rise by 6.4% in 2017-18. Industry assets, which is a more accurate indicator of industry
performance, is projected to rise by 14.2% over the current financial year.
“The KiwiSaver scheme continues to grow in size as a result of rising membership numbers and
contributions since its inception, and is expected to be the main contributor to industry growth. This
is due to the scheme being operated on an opt-out basis,” said Mr Cloutman.
Investment revenue for the industry is also anticipated to remain strong, with the NZX 50 projected
to continue rising over the current financial year. The 10-year bond rate is forecast to reverse its
downward trend, driving greater revenue from fixed-income assets for the various superannuation
schemes.

 Aged Care Residential Services
Revenue in the Aged Care Residential Services industry is expected to increase by 5.0% in 2017-18
due to the growing number of elderly New Zealanders requiring high-level care.
“New business models, an increase in the number of facilities with extra charge contracts and a rise
in the number of elderly with higher functional dependency levels have driven the industry's
performance over the past five years,” said Mr Cloutman.
IBISWorld expects these trends to continue in 2017-18, boosting industry revenue to $2.98 billion.

Industries set to fall in 2017-18
Postal and Courier Pick-up and Delivery Services
The Postal and Courier Pick-up and Delivery Services industry has struggled with a changing
operating environment over the past five years.
“Parcel delivery services have overtaken traditional letter delivery services as a share of the
industry. This has led to significant structural change in the industry, as industry firms have shifted
their focus towards the burgeoning parcel delivery segment,” said Mr Cloutman.
“Online shopping has expanded significantly over the past five years. Because online retailers need
to transport purchased goods to consumers, demand for parcel delivery services from both couriers
and postal service providers has risen rapidly over the past five years,” added Mr Cloutman.
According to IBISWorld research, the surge in online shopping has not been sufficient to offset the
continued decline in the volume of traditional letters. Demand for letter delivery has fallen as
businesses and consumers have shifted to alternative communication methods, such as email, text
message, phone calls and social media.
Industry revenue is expected to fall by 2.2% in 2017-18, to total $2.4 billion. Intensifying industry
competition is expected to exert downward pressure on revenue performance, as major player NZ
Post lacks a dominant share of the growing parcel delivery services segment.
Television Broadcasting
The Television Broadcasting industry is expected to fall by 5.0% in 2017-18, to $1.5 billion.
“The country’s sole pay-TV provider, Sky Network, has struggled to compete as Netflix has gained a
growing share of New Zealand’s media. Sky Network’s industry-specific revenue is projected to fall
by 2.7% in 2017-18. The firm’s planned merger with telecommunications firm Vodafone was blocked
by the industry regulator early in the year, with the two firms abandoning the merger plans in June,”
said Mr Cloutman.
Downstream media buying agencies have flocked to social media, search engines and other forms of
online content for advertising as firms have recognised changing media consumption habits among
consumers.
State-owned Television New Zealand’s (TVNZ) flagship FTA channels TVNZ1 and TVNZ2 have also
struggled due to weaker government funding and falling advertising revenue. The company’s
revenue is expected to fall by 3.6% in the current year as these trends continue.
Rail Transport
IBISWorld expects revenue in the Rail Transport industry to decline by 5.1% in 2017-18 as a result of
natural disaster and lost freight volumes.
Industry revenue is primarily generated by KiwiRail’s rail freight transport operations, and the
government-owned, profit-oriented entity’s expected negative performance in 2017-18 is anticipated
to affect the industry significantly. The 2016 Kaikoura earthquake had a significant effect on KiwiRail.

 The earthquake damaged several parts of the company's railway network, such as KiwiRail's Main
North Line transport route in the South Island.
“While parts of the rail network have already been restored, such as between Christchurch and
Ferniehurst, Canterbury, the ongoing repair work and the subsequent loss in freight transport
volumes is likely to negatively affect the company and the overall industry in 2017-18,” said Mr
Cloutman.
However, IBISWorld research found that expected increases in rail passenger trip numbers, through
increased investment by the Greater Wellington Regional Council and Auckland Council, is likely to
limit industry decline over the year.

Fossil Fuel Electricity Generation
IBISWorld expects revenue in the Fossil Fuel Electricity Generation industry to fall by 5.9% in 201718, to $303.4 million. This follows years of significant declines as coal- and gas-fired power plants
have become less prominent players in New Zealand’s energy mix.
“Renewable energy, predominantly hydro, geothermal and wind, accounts for over 85% of electricity
generation in New Zealand. With fossil fuel taking up a smaller share, the need for coal-fired plants
to provide baseload power has waned,” said Mr Cloutman.
“Gas-fired power plants are diminishing in importance due to hydropower’s ability to provide peaking
power during periods of strong demand,” added Mr Cloutman.
In 2017-18, wholesale electricity prices are expected to remain weak due to an oversupply of
electricity capacity, which is in stark contrast to Australia’s electricity situation. Profitability for fossil
fuel plants is expected to fall to 8.1% in 2017-18, significantly lower than 17.0% for hydro-electric
plant operators and 13.1% for geothermal power plants, according to IBISWorld.
Gas Supply
IBISWorld expects industry revenue to decline by 6.2% in 2017-18. Heightening price competition for
final gas users is projected to cause prices to decline as operators compete for market share. In
addition, a dip in gas consumption volumes is anticipated over the current year, further contributing
to the revenue decline.
“Given the rate of customers switching among gas retailers is expected to increase from already
high levels, lower prices will be a key factor for both attracting new customers and retaining existing
ones,” said Mr Cloutman. “Expected growth in the use of alternative energy sources and increasing
concerns about the environment are likely to hamper demand for gas.”
The Gas Supply industry includes gas distributors and retailers. Distributors own and operate lowand medium-pressure mains and charge fees for their use. Gas retailers sell gas to consumers and
pay fees to transporters and distributors for the use of pipelines and gas mains.
-endsAbout IBISWorld
Since 1971, IBISWorld has been providing thoroughly researched, reliable and up-to-date business
information and analysis to thousands of companies.
Today, IBISWorld’s team of expert analysts research economic, demographic and government data
to provide invaluable insights into New Zealand’s 200+ industries and its key business environment
indicators, featuring forecasts, analysis, historical data and key statistics. IBISWorld’s report
collection also includes 500+ Australian industry reports and 2000 company reports, as well as a
large collection of specialised and on-demand industry reports. Report collections covering
international markets are also available.

 For more information, to obtain industry reports or to speak with an analyst, please
contact:
Shae Courtney
IBISWorld Media Relations Representatives – Anne Wild & Associates Pty Ltd
Telephone: +61 2 9440 0414
Mobile: +61 420 736 136
Email: scourtney@awassociates.com.au