Category: New Zealand

Source: Reserve Bank of New Zealand

29 January 2025 – In a speech delivered today, Reserve Bank Chief Economist Paul Conway discussed New Zealand’s longer-term ‘potential output’ and its significance for monetary policy.

“Understanding potential output is crucial for assessing whether the economy is running too hot or too cold from an inflation control perspective and for gauging medium-term growth prospects,” Mr Conway says.

Mr Conway also outlined the Reserve Bank’s assessment of the ‘neutral interest rate’, which shapes expectations for where the OCR will tend to move over time, in the absence of economic shocks.

The speech goes beyond the business cycle to explore New Zealand’s long-term economic challenges and key factors influencing future growth – including productivity growth. It also explores drivers behind changes in New Zealand’s neutral interest rate.

Key insights from the speech include:

• In the absence of future shocks, economic activity in New Zealand will tend towards the level of potential output, as pandemic-related disruptions fade. Likewise, without future shocks, the OCR will tend towards the neutral interest rate.
• Over the next few years, with declining inward migration and weak productivity growth, potential output growth is likely to be modest. This will set a modest ‘speed limit’ on how fast the economy can grow without generating excess inflation pressure.
• Unlocking higher investment and productivity growth is key to raising potential output growth and improving per capita incomes. This would also reduce the likelihood of negative recessionary economic growth during future periods of restrictive monetary policy.
• Reserve Bank estimates suggest that the neutral interest rate has fallen over recent decades, given weak productivity growth and aging populations. Our research suggests that this decline may be reversing and that the long-term nominal neutral interest rate currently lies between 2.5% and 3.5%.

Background notes

What is potential output?
Potential output is the level of goods and services the economy can sustainably supply without generating excess inflation or disinflation. It depends on the supply of inputs – capital and labour – and how productively they are combined to produce output. For example, if there are more people available to work, more capital to use, or better ways of doing things, then potential output increases.

What is the neutral interest rate?
The nominal neutral interest rate is the level of the Official Cash Rate (OCR) consistent with inflation being sustainably at target and the economy running at its potential output. Without future shocks, the neutral interest rate indicates where the OCR is likely to settle to keep inflation at the 2% target midpoint.
 

More information

Read the speech: https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=2920e70068&e=f3c68946f8
Watch the speech: https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=e1dd2a8aa0&e=f3c68946f8

Source: Fonterra

Fonterra is taking another significant step toward its climate goals and operational resilience with $150 million in investments in electrification projects across the North Island over the next 18 months.

Investments into electric boilers at the Co-operative’s Whareroa, Edgecumbe and Waitoa sites, along with further fleet decarbonisation, marks further steps in renewable energy supporting the Co-operative’s sustainability targets* while future-proofing operations.

Fonterra aims to build enduring, cost-efficient assets while enhancing energy security across its manufacturing operations and ensuring a sustainable energy supply.  

Fonterra’s Chief Operating Officer, Anna Palairet, says the investments are a significant step for the Co-operative’s future operations.

“Last year we turned off the last coal boiler in the North Island, meaning manufacturing operations in the North Island are now coal-free. These investments are the next step in creating enduring assets that are fit for the future, as we look to reduce our reliance on gas.

“Choosing the right energy solutions is about striking a balance between affordability, security of energy supply and reducing our environmental footprint, and the new electric boilers are crucial to navigating this challenge.”

“These electrification projects are at the heart of ensuring efficient operations with a reliable energy supply for our manufacturing sites and to support the long-term sustainability of our business. It also represents a commitment to our farmer owners that we are building a resilient, future-ready Co-operative.”

Investments announced are:

Whareroa: The site will undergo a staged energy transformation with the first stage including the installation of two electrode boilers. The $64 million investment is expected to reduce the site’s annual emissions by an estimated 51,000 tonnes – the equivalent of removing around 21,000 cars from New Zealand roads – and contribute a 3% reduction** towards Fonterra’s overall 2030 Scope 1 and 2 GHG emissions reduction target.

Edgecumbe: The site will transition from the use of steam and electricity generated through a co-generation plant, to a reliable source of renewable energy with the installation of a new electrode boiler. The $57 million investment is expected to reduce the site’s annual emissions by an estimated 28,000 tonnes – equivalent to removing around 11,000 cars from New Zealand roads – and contribute a 1.5% reduction** towards Fonterra’s overall 2030 Scope 1 and 2 GHG emissions reduction target and reduce the Co-op’s overall natural gas reliance by approximately 8%***.

Waitoa and Waitoa UHT: Following the closure of its last coal boiler in November 2024, the Co-op is investing a further $18 million in installing two Resistive Element Boilers to boost heat production, while providing a secure and reliable energy source allowing for future growth in UHT processing.

Fleet decarbonisation: The next step in looking for more economical solutions for the future includes a pilot of six EV tankers and associated infrastructure later in the year, expected to provide an approximately 60% annual reduction in fuel costs per tanker, along with environmental benefits.

*The Co-operative’s target is 50.4% absolute reduction of Scope 1 & 2 GHG emissions by 2030 from a 2018 baseline.

** From a 2018 baseline.

*** An approximate 8% reduction from the Co-op’s average annual natural gas usage from FY23 and FY24.

About Fonterra

Fonterra is a co-operative owned and supplied by thousands of farming families across Aotearoa New Zealand. Through the spirit of co-operation and a can-do attitude, Fonterra’s farmers and employees share the goodness of our milk through innovative consumer, foodservice and ingredients brands. Sustainability is at the heart of everything we do, and we’re committed to leaving things in a better way than we found them. We are passionate about supporting our communities by Doing Good Together.

Source: Te Herenga Waka—Victoria University of Wellington

Researchers exploring the deep waters off the Fiordland coast have caught on camera marine communities that have never been filmed before. These communities include a protected species of red coral that has not previously been seen in such large numbers.

“We were filming at depths of 80 to 130 metres and found amazing marine communities. The most incredible find—unlike anything we have seen elsewhere—was about 4 kilometres north of the entrance to Doubtful Sound/Patea. On the ocean floor, we saw forests of bright red coral,” said Professor James Bell, a marine biologist at Te Herenga Waka—Victoria University of Wellington.

The coral species, Errina novaezelandiae, is commonly known as red coral, although it is not a true coral but a related animal called a hydrocoral.

The discovery of the red coral forests was made while the researchers were working on a project to explore and map marine life in Fiordland’s deep waters. They were working on board the Department of Conservation (DOC) vesselSouthern Winds.

“We’ve been exploring these deep reefs in Fiordland for many years, but we’re rarely able to work on the open coast outside the fiords because of the weather. On our most recent trip in January, the weather was finally on our side,” said Professor Bell.

Using a remotely operated vehicle (ROV), the research team collected video footage of reefs at depths of greater than 100 metres in areas that have not previously been filmed.

“We’ve deployed the ROV more than 100 times in deep waters around New Zealand, but we have not seen communities like those we found off the open coast outside Doubtful Sound/Patea. In other parts of the country, we usually find reefs at these depths are dominated by sponges. In this area off the Fiordland coast, red corals dominated. The water was also incredibly clear down at 100 m and we could see the reef from a distance of about 30 to 40 m,” he said.

Red corals are known to live in some places inside the fiords and are considered to be associated with the sheltered fiord conditions. The population discovered around the open coast was distinguished by its massive size, with tens of thousands of corals seen.

Video footage of the reefs shows numerous red corals, along with a range of other animals including larger black corals. Both red and black corals are protected species under the Wildlife Act.

These coral forests play a key role in maintaining habitat diversity, supporting many fish and crayfish species, said Professor Bell.

“Filming the animals that live on these deep-water reefs provides us with more information about the extraordinary biodiversity in our seas. This information is crucial to decisions about the use and protection of our marine environment. While much of Fiordland’s inland waters are protected, this is not the case for the open coast. In fact, most deep-water reefs around Aotearoa are not protected in marine reserves,” he said.

The research was supported by the George Mason Charitable Trust and DOC’s conservation services programme. DOC also provided logistical support.

Richard Kinsey, a DOC senior ranger who was on the trip, said: “It is exciting when you get to put the ROV into places you can rarely access as it gives insights into a completely different part of the fiord ecosystem. You just never know what you are going to find. For DOC, increasing our understanding of where these protected species are helps us to understand the potential threats to them.”

DOC senior science advisor Lyndsey Holland added: “Our understanding of protected coral distribution in Fiordland is dominated by black corals. Other protected corals in the area haven’t been studied as extensively, so this finding is a breakthrough. We do know that New Zealand boasts a diverse array of cold-water corals offshore, so this discovery validates the need to survey and monitor Fiordland corals so we can best protect them.”

Video footage of the deep-water reefs off Fiordland is here:

https://www.youtube.com/watch?v=6mxS4RaYXiI

Source: Kennards Hire

Forsyth Barr Stadium is taking a strong step towards making events more sensory-inclusive and enjoyable for everyone attending, by proudly unveiling the Kennards Hire Sound Sensitivity Station – the first of its kind at a major venue in the South Island. This initiative reflects the stadium’s ongoing commitment to creating a sensory-friendly environment for major events.

The new station at Forsyth Barr Stadium will be making its debut just in time for the action-packed Freestyle Kings Motorcross show on January 31, 2025. The station will provide free, self-service earplugs, enhancing the accessibility and enjoyment of sporting events, concerts, and other live events. To ensure prime accessibility, the station will be located on Level 2, as attendees exit the elevators and go through the doors to the concourse. It will be a permanent fixture at the stadium, restocked ahead of all major events.

Following the successful launch of the first Kennards Hire Sound Sensitivity Stations at Eden Park in March of last year, this new installation at Forsyth Barr Stadium marks another big step towards greater sensory inclusion for Kiwis attending major events. The Eden Park stations have already dispensed over 5,500 pairs of free earplugs since their launch, highlighting the importance, and popularity, of the service for people with sound sensitivity, as well the growing mainstream adoption of earplugs for hearing protection with all eventgoers.

Over-stimulation to noise, particularly in higher sound intensive areas of stadiums such as front-of-stage, is a common trigger for sound sensitive individuals. One survey among Kiwi adults found that 10% of its participants were moderately or highly sensitive to noise. Moreover, the overall prevalence of Auditory Processing Disorder (APD) among children – including heightened sensitivity to loud sounds – is estimated at 6.2%. By reducing the auditory impact, fans can more comfortably enjoy the full spectrum of events offered at the stadium.

The idea for these stations originated from the personal experiences of Kennards Hire team member and mum, Kimberley White, whose teenage son grappled with managing his sensitivity to sound when attending a major pop concert a couple years ago. This motivated Kimberley and the team at Kennards Hire to pursue a solution that would benefit others in similar situations.