COVID-19: New Zealand/Pacific Islands update for Australian exporters

27 May 2020

Supply chain and logistics

• New Zealand – The NZ Government will underwrite a global network of air freight services to secure the movement of critical imports and high-value exports. The current capacity will increase from 90 weekly cargo flights to nearly 150.

Infrastructure

• New Zealand – Fletchers Building, New Zealand’s largest infrastructure and construction company, has made 1,000 jobs redundant. The move is part of the company’s response to an expected downturn in the commercial and residential construction sectors.
• New Zealand – The Minister for Economic Development, Transport and Urban Development has foreshadowed a pipeline of more than 500 projects worth NZ$21.1 billion. This is in addition to NZ$48 billion of transport infrastructure investments and the NZ$12 billion New Zealand upgrade program.
• Fiji – Infrastructure projects have been delayed due to the pandemic.
• Papua New Guinea – New infrastructure projects, including hospitals and energy plants, have ceased construction in line with government work directives. Quarantine restrictions have prevented expat workers – mainly project supervisors – from entering the country. This has resulted in projects being delayed. The building and construction industry is experiencing a shortage of materials due to supply issues.

Tourism

• Pacific Islands – Demand for a trans-Tasman and Pacific ‘bubble’ continues. The early opening of borders is regarded as a critical component of regional economic recovery. Domestic and Pacific tourism is being considered as a possible first step. The South Pacific Tourism Organisation has released its Pacific Tourism: COVID19 Impact and Recovery Report.
• Fiji – Approximately 97% of tourism businesses are partially or fully closed. Close to 40,000 people working in the hotel and tourism sector are on leave without pay or working reduced hours. With approximately 40% of Fijian GDP dependent on tourism, the country expects long-term impacts on its economy. The Fijian Government is providing support packages and more will be required as recovery is unlikely until winter 2021 (peak season).
• Fiji – More than 750 Fiji Airways staff members (including all cabin crew) have been given termination letters. All 79 expatriate pilots have had their contracts terminated. A 20% permanent salary reduction has been implemented for all retained employees effective from June 1. There are government loan guarantees and other support measures in place to underpin the viability of the airline.
• Papua New Guinea – Outbound international passenger flights have resumed (five times a week to Brisbane; twice a week to Cairns; and four times a week to Singapore).
• New Zealand – A new business-led export group, Trans-Tasman Safe Border Group, is developing recommendations for the safe reopening of borders between Australia and New Zealand.

Mining and resources

• Papua New Guinea – Oil and gas companies have moved into care-and-maintenance mode. Some key personnel have returned to the country in the past few weeks.
• Papua New Guinea – There is heightened uncertainty regarding mining operations (e.g. Barrick Gold) as the PNG Government seeks to take closer control or extract additional revenue from international mining corporations. Austrade is working with the Department of Foreign Affairs and Trade to gain insights into supply chain impacts for Australian METS firms.
• Papua New Guinea – The national government and the Morobe provincial government have signed an agreement to recommence negotiations with the developers of the Wafi-Golpu gold and copper mine, Newcrest Mining and Harmony Gold.
• Papua New Guinea – The Pasca A offshore gas-condensate project is set to be the next resources project that the Marape government will consider. The State Negotiating Team will begin discussions shortly with Twinza Oil to complete a gas agreement.

Food and beverages

• All Pacific Islands are trying to ramp up local production for domestic consumption. There are protein shortages across the region.
• New Zealand – Fonterra reports a “sharp lift” in earnings. Total group normalised earnings (EBIT) for the nine months to April 30 was NZ$815 million, an increase of NZ$301 million on this time last year.

Banking and finance

• All Pacific Islands report growing liquidity constraints and foreign exchange deficits due predominantly to the downturn in tourism. Estimates by the World Bank and the Asian Development Bank point to significant reductions in growth across countries in the Pacific. Banks such as ANZ and Westpac have put in place business continuity plans, made arrangements to defer loan repayments and will offer interest-free loans to Pacific Island nations.
• Fiji – The Fiji National Provident Fund (FNPF) has paid out more than F$49.1 million to date to over 77,500 applicants as part of the COVID-19 income supplementation support scheme.

Consumer behaviour

• Pacific Islands – Private money transfers to PICs (historically regarded as a natural stabiliser to economic shocks) have reduced by more than 25% on the same period last year. Such a reduction in remittances has an immediate impact on household budgets, on top of unemployment. Overall remittances are expected to fall by 22% to US$540 million (F$1.2 billion) this year. Tonga will be hardest hit, falling by 33%, Samoa (29%), Fiji (18%), the Solomon Islands (17%) and Vanuatu and Kiribati (both 16%).