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Brexit vote poses risk to New Zealand export earnings: think-tank

Xinhua, June 14, 2016 Adjust font size:

New Zealand exporters should be hoping for a "stay" victory when Britain votes on a referendum to stay in or to exit the European Union later this month, an independent economic think-tank said Tuesday.

With the polling trends moving towards a "leave," or "Brexit," vote in recent days, the New Zealand Institute of Economic Research (NZIER) warned the post-Brexit picture was "horribly murky."

"No one knows precisely how it might play out, especially after the two-year withdrawal period lapses," NZIER Deputy Chief Executive John Ballingall said in a statement.

"But when the smoke clears, the most obvious impact on New Zealand of a Brexit vote will be on our exports to the UK, which could drop by 190 million NZ dollars (133.63 million U.S. dollars) per year due to slower UK income growth."

Slower income growth was likely to dampen the demand for New Zealand tourism, as British travelers might well postpone long-haul travel until economic conditions improved.

However, accessing the UK market was unlikely to get tougher for New Zealand goods exporters.

"For manufactured goods, the UK is likely to default to using the EU's existing World Trade Organisation (WTO) commitments on tariffs, as it does at the moment," Ballingall said.

"The likely market access arrangements for our primary exports are more difficult to determine in advance. We would hope that any renegotiation of the UK's WTO commitments would leave New Zealand exporters no worse off than now."

New Zealand and Britain also had a substantial investment relationship, with Britain holding a stock of investment of more than 4.2 billion NZ dollars (2.95 billion U.S. dollars) in New Zealand.

"We might expect UK investors to become more risk-averse while the Brexit carnage plays out, and that could limit the extent to which they see investment in New Zealand as a priority," Ballingall said.

"With Brexit, the only certainty is uncertainty. And this uncertainty is unlikely to be in New Zealand's interests." Endit