Thomas White Global Investing
New Zealand
New Zealand Stamp
October 21, 2011
A Postcard from the Asia Pacific
New Zealand: Will the All Blacks wash away the Kiwi blues?

Come Sunday, New Zealanders will expect to get a hold of something that has eluded them for more than two decades: the Rugby World Cup. With the hosting of the sporting event, billed as the world’s third-largest, all of New Zealand has been praying for a victory for the ‘All Blacks’, the nation’s team. Yet again, performers from the country’s Maori indigenous tribes will present the Haka, a posture dance for the conquest of the All Blacks against France in the finals.

But win or lose the finals, New Zealand will no doubt have already scored a great victory simply by hosting the Rugby World Cup event successfully. Thousands of spectators the world over have thronged to the country’s stadiums. Millions of tankards of beer have been consumed inside and outside the sporting venues. The country’s residents have even started renting out their living rooms, as the country’s hotel industry has struggled to accommodate the 100,000 tourists who have flown into New Zealand. With the arrival of so many colorfully dressed tourists, the rugby event has ushered in a festive mood resembling a carnival.

The sporting event could not have come at a better time for the Pacific island. Just over a year ago, New Zealand started witnessing a series of catastrophes. In September last year, an earthquake damaged an important stadium in the country’s second-largest city, Christchurch, which was to hold nearly seven matches for the World Cup including two quarterfinal games. This incident was followed by a mining accident in November at the Pike River Mine, where the bodies of the 29 mining workers still lay buried. But the worst disaster struck when a 6.3-magnitude earthquake hit Christchurch in February this year killing 180 people. The small nation of just 4.4 million people struggled to cope with such a human loss. Economists predicted that the February earthquake alone would knock 1.5 percentage points off of New Zealand ‘s GDP growth in 2011.

But the indefatigable Kiwis trudged on, making the best of every bit of opportunity that came across their way. And the Rugby World Cup, in particular, was just such an opportunity. Rugby to a New Zealander is more than just a game. It is the fulcrum of social activity for the country’s citizens, where young and old define themselves by their membership in the local rugby clubs. Often, the sport-loving New Zealander registers his child in the community rugby club as soon as the child turns five.

Not surprisingly, the failure or the success of the nation’s team is taken to heart. In 1999, when New Zealand lost in the semi-finals of the Rugby World Cup, the luggage pieces belonging to the nations’ beleaguered players were scribbled with the word “Losers” all over. Again in the 2007 World Cup, when the All Blacks posted their worst-ever performance, the country’s stock market plummeted.

The current Rugby World Cup, however, is more than an emotional ride for the country. Its success has been measured by the amount of economic activity that the Cup has been able to generate – not a bad yardstick to judge the event by, given the dire situation of New Zealand’s economy. The country has spent nearly $555 million on stadium upgrades and playground infrastructure, generating hundreds of jobs. Ticket sales alone are estimated to have topped $225 million, while accommodation-related spending generated another $205 million according to a report by MasterCard. The Britain-based media agency, BBC, reported that an estimated $188 million will be spent on food and drink, as spectators are estimated to consume 7.5 million liters of beer and gorge down 7.35 million pies and sausages.

The event has been so important that the country’s central bank, which has been conducting an expansionary monetary policy, has noted the rugby extravaganza as a significant fiscal stimulus. The central bank’s governor opined that although the gross spending related to the event would not technically boost the GDP, its magnitude would equal nearly 1.4% of the quarterly GDP. The Cup, which is being telecast to nearly 180 countries, is also channeling incremental revenues to New Zealand. Neighboring Australia, another rugby fanatic, managed to reach the semi-finals, which has kept up the momentum of tourists flying to New Zealand. Truth be told, the event has been a lucky charm in some respects.

Apart from the tourism and hospitality industries, other sectors too are trying to capitalize on the Rugby World Cup’s popularity. New Zealand’s small but technically advanced aviation industry conducted a three-day event called “Flair”, marketing its expertise in aviation design, manufacturing and pilot training to clients who came to watch the sporting games.

The confidence arising from the success of the Rugby World Cup is likely to spill over to the other sporting events that the Kiwi’s will host in the upcoming years. New Zealand will be a stopover port for the Volvo Ocean boat race in 2012, and will also host the Under-20 FIFA World Cup in 2015.

Despite the festive mood, New Zealanders are still waiting with a bated breath. That’s because the All Blacks will be playing for the ultimate championship on Sunday. If the All Blacks can lift the trophy on their home soil after nearly 24 years, there perhaps could be no better salve for New Zealand’s hurts over the past year, both emotional and economic.

 

Image Credit: George Olcott under Creative Commons license

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