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Safe Haven Status May Pay Dividends For NZ Tourism

1 August 2005

Safe Haven Status May Pay Dividends For NZ Tourism

New Zealand’s reputation as a low risk tourist destination may be further enhanced by the terrorist attacks in London.

Spicers Chief Economic Adviser, Rozanna Wozniak, was in central London on 7 July during the first four devastating blasts and believes their tourism industry will probably suffer as a result. Although Londoners showed a strong resilience in the aftermath of the initial attacks, the second round of attacks and persistent risks are likely to weigh on sentiment.

“Although the Madrid bombings in 2004 resulted in a modest reduction in tourist flows, London’s role as the tourist hub of the UK is significant. Tourism is London’s second largest industry.”

“The net effect of these disasters is that people will either not travel, or will seek destinations that are deemed “safe”. In the aftermath of the New York terrorist attack of 11 September 2001, New Zealand’s perception as a safe haven saw tourist numbers climb 3 per cent during the following year, while Australia’s tourist numbers fell 5 per cent.”

Ms Wozniak also predicts that more New Zealanders returning home following the London bombings will have a positive impact on New Zealand’s immigration flows.

“The number of New Zealanders heading overseas is likely to reduce while some New Zealanders overseas will inevitably return home. The trend in NZ net migration has stabilized and perhaps the events in London will see net migration recover slightly.”

Net immigration was one of the drivers behind the boom in house prices in the last two years.

Meanwhile, Spicers is urging investors to look beyond high dividends and interest rates at the medium term performance of investment categories.

In their Quarterly Strategy Update, Spicers’ fund manager Arcus Investment Management recommends selecting investments capable of withstanding the continued inflation pressure.

Arcus Chief Investment Officer Mark Brighouse says it is sometimes difficult to separate an asset’s near term income generation from the medium term income potential.

“While many investors see maximizing today’s nominal income as prudent and defensive, the risk of this strategy may be greater than they realise.”

Arcus is advising investors to select investments such as utilities and infrastructure assets, growth stocks, commercial property and inflation indexed bonds, all of which offer a measure of protection against inflation.

ENDS

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