The New Zealand economy contracted by 0.4 percent in the September quarter, continuing a three-quarter long recession thus far. Real GDP growth for the year ended September was 1.7 percent. The recession is the country's worst in 10 years, the last being associated with the Asian financial crisis of 1997.
Yesterday, Statistics New Zealand reported that the country's current account deficit (the trade balance on international goods and services) swelled to 8.6 percent of GDP.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Monday, December 22, 2008
Thursday, November 13, 2008
New Zealand Treasury Sees Hard Times on Eve of Election
The New Zealand Treasury sees hard times ahead in its November Economic and Fiscal Update of 7 November 2008, produced on the eve of the election.
The release of the document by outgoing Minister of Finance Michael Cullen of the Labour Government apparently caused consternation at No. 1 The Terrace because it was labeled "In Confidence" and was not intended for release.
National finance minister-designate Bill English has publicly complained Cullen has breached constitutional convention by failing to obtain the incoming government's approval to release sensitive information.
Cullen, seeking to make some political hay while he still has his hands on sensitive material, claimed that the paper shows the incoming National government is misleading the public into thinking that the Treasury briefing to National gave a rosier picture.
The released document, which looks like a cut & paste by a substance-abusing economist, downgrades the Treasury's earlier GDP forecasts against a backdrop of weakening international demand and a slowing domestic economy.
If anything, updated global forecasts by both the OECD and the IMF in the last 24 hours indicate that the Treasury's forecasts will need to be adjusted downwards yet again.
The Treasury predicts GDP growth in NZ's top 20 trading partners will grow by 1.8 percent in calendar year 2009 but the OECD is projecting a GDP growth rate for the OECD area of -0.3 percent.
Year................Treasury........OECD (OECD Area)
2008....................2.8.........................1.4
2009....................1.8.......................-0.3
2010....................3.0.........................1.5
The Treasury is now forecasting that the New Zealand economy will contract by -0.5 percent in March year ending 2009, growing only by 1.4 percent in 2010 but bouncing back by 3.2 percent in 2010. The IMF shows a similar track in the year ahead, but sees a smaller bouncer back in 2010 for New Zealand.
NZ Real GDP %
.......................... Treasury (March yr)...........IMF (Calendar year)
2009.............................-0.5................................0.7 (2008)
2010...............................1.4.................................1.5 (2009)
2011...............................3.2.................................2.3 (2010)
The Treasury expects unemployment to rise to 5.5 percent in March 2010 and maintain that level in 2011.
Hard times indeed...
The release of the document by outgoing Minister of Finance Michael Cullen of the Labour Government apparently caused consternation at No. 1 The Terrace because it was labeled "In Confidence" and was not intended for release.
National finance minister-designate Bill English has publicly complained Cullen has breached constitutional convention by failing to obtain the incoming government's approval to release sensitive information.
Cullen, seeking to make some political hay while he still has his hands on sensitive material, claimed that the paper shows the incoming National government is misleading the public into thinking that the Treasury briefing to National gave a rosier picture.
The released document, which looks like a cut & paste by a substance-abusing economist, downgrades the Treasury's earlier GDP forecasts against a backdrop of weakening international demand and a slowing domestic economy.
If anything, updated global forecasts by both the OECD and the IMF in the last 24 hours indicate that the Treasury's forecasts will need to be adjusted downwards yet again.
The Treasury predicts GDP growth in NZ's top 20 trading partners will grow by 1.8 percent in calendar year 2009 but the OECD is projecting a GDP growth rate for the OECD area of -0.3 percent.
Year................Treasury........OECD (OECD Area)
2008....................2.8.........................1.4
2009....................1.8.......................-0.3
2010....................3.0.........................1.5
The Treasury is now forecasting that the New Zealand economy will contract by -0.5 percent in March year ending 2009, growing only by 1.4 percent in 2010 but bouncing back by 3.2 percent in 2010. The IMF shows a similar track in the year ahead, but sees a smaller bouncer back in 2010 for New Zealand.
NZ Real GDP %
.......................... Treasury (March yr)...........IMF (Calendar year)
2009.............................-0.5................................0.7 (2008)
2010...............................1.4.................................1.5 (2009)
2011...............................3.2.................................2.3 (2010)
The Treasury expects unemployment to rise to 5.5 percent in March 2010 and maintain that level in 2011.
Hard times indeed...
Wednesday, October 29, 2008
Labour Steals A March Over National on Emergency Unemployment Policy in Election Campaign
Stealing a march on National which is expected to announce its policy to respond to the effects of the global economic crisis, Labour's leader Helen Clark released details of her party's emergency unemployment benefit today.
The normal waiting period for unemployment benefits will be reduced to 1-2 weeks and means-testing will not be applied to the first 13 weeks of benefit payment. Only those laid off or made redundant would be eligible.
Labour estimates the cost of the transitional assistance package at $50 million, with the funding coming from within existing government revenues.
The normal waiting period for unemployment benefits will be reduced to 1-2 weeks and means-testing will not be applied to the first 13 weeks of benefit payment. Only those laid off or made redundant would be eligible.
Labour estimates the cost of the transitional assistance package at $50 million, with the funding coming from within existing government revenues.
Monday, October 27, 2008
National's Infrastructure Policy in the New Zealand Election
National party leader John Key announced his party's election policy on infrastructure on Monday. More details here.
A National government would spend $8.55 billion on new infrastructure over the next six years, some $3.7 billion more than the Labour's infrastructure policy provides for.
National sees its policy as part of a "stepped up" capital spending plan to act as a counter-cyclical macroeconomic management plan to deal with the forecast decline in economic activity resulting from the global financial crisis.
Key identified several major projects, already announced as part of National's election policy, that would expand New Zealand's infrastructure. Expanding the broadband network will be the single largest project, costing $1.5 billion over six years. Roading and other transport projects, including the Waikato expressway, will total $750 million and additional prison facilities at a cost of $315 million will be constructed. National will also increase the building programme for schools by $500 million over three years.
Further infrastructure projects will be announced later this week.
Infrastructure projects will be funded in part by capital channeled through the 40 percent of contributions in the New Zealand Superannuation Fund being directed to the purchase of NZ-based assets. Key has been reluctant to state whether the deposit guarantee fees payable by the major trading banks, estimated at $100 million, will be used to help finance infrastructure despite speculation that National will do so. Key has said National will not borrow to finance infrastructure.
National pledges to streamline and speed up resource consents required under the Resource Management Act (RMA). A "Priority Consent" will be introduced to streamline resource consents for major infrastructure projects of "critical national importance". While environmental assessment will still be required, consents will be removed to the national level with local councils no longer involved in the priority consent process. A decision on priority consents will be required within 9 months.
Older voters, and students of recent NZ economic history, will recall National's "fast track procedure" that was rammed through in the National Development Act of 1979, an environmental impact assessment being required as a response to appease public resistance to fast tracking projects in the "national interest" that might otherwise be subject to insufficient public oversight.
Although only three projects were fast-tracked before the legislation was repealed by a Labour government in 1986, a National government in 1981 narrowed the basis for environmental assessment and the grounds for judicial review of such reports. Voters might well be best advised to adopt a "once bitten, twice shy" approach to this particular element of National's infrastructure policy.
A National government would spend $8.55 billion on new infrastructure over the next six years, some $3.7 billion more than the Labour's infrastructure policy provides for.
National sees its policy as part of a "stepped up" capital spending plan to act as a counter-cyclical macroeconomic management plan to deal with the forecast decline in economic activity resulting from the global financial crisis.
Key identified several major projects, already announced as part of National's election policy, that would expand New Zealand's infrastructure. Expanding the broadband network will be the single largest project, costing $1.5 billion over six years. Roading and other transport projects, including the Waikato expressway, will total $750 million and additional prison facilities at a cost of $315 million will be constructed. National will also increase the building programme for schools by $500 million over three years.
Further infrastructure projects will be announced later this week.
Infrastructure projects will be funded in part by capital channeled through the 40 percent of contributions in the New Zealand Superannuation Fund being directed to the purchase of NZ-based assets. Key has been reluctant to state whether the deposit guarantee fees payable by the major trading banks, estimated at $100 million, will be used to help finance infrastructure despite speculation that National will do so. Key has said National will not borrow to finance infrastructure.
National pledges to streamline and speed up resource consents required under the Resource Management Act (RMA). A "Priority Consent" will be introduced to streamline resource consents for major infrastructure projects of "critical national importance". While environmental assessment will still be required, consents will be removed to the national level with local councils no longer involved in the priority consent process. A decision on priority consents will be required within 9 months.
Older voters, and students of recent NZ economic history, will recall National's "fast track procedure" that was rammed through in the National Development Act of 1979, an environmental impact assessment being required as a response to appease public resistance to fast tracking projects in the "national interest" that might otherwise be subject to insufficient public oversight.
Although only three projects were fast-tracked before the legislation was repealed by a Labour government in 1986, a National government in 1981 narrowed the basis for environmental assessment and the grounds for judicial review of such reports. Voters might well be best advised to adopt a "once bitten, twice shy" approach to this particular element of National's infrastructure policy.
Labour's Infrastructure Policy in the New Zealand General Election
The Labour party's infrastructure policy released during the New Zealand election campaign envisions a a twenty year plan for sustainable infrastructure development. More details here.
Over that time period, Labour would seek to achieve a 90% renewable electricity generation target, work with local government to set priorities for local infrastructure investment, and improve New Zealand's water quality and sustainability of water usage.
Having re-nationalised rail track and then rail operations into the Kiwi Rail state-owned enterprise, Labour intends to expand long-haul rail freight as part of its plan for a more sustainable transportation policy. It will also support creation of a electricified rail network for the greater Auckland metro area including the North Shore to expand commuter rail and ease road congestion in the country's largest urban area.
Like National, Labour will also accelerate the pace of investment in the broadband network to improve productivity in business, government, universities, hospitals, and schools.
To fund its long term infrastructure plan, Labour will issue long-term infrastructure bonds which have a tax-free inflation-indexed element. Additionally, public-private partnerships will be adopted where it is cost-effective to do so to reduce the burden on the taxpayer of financing projects where infrastructure bond funds are insufficient.
Over that time period, Labour would seek to achieve a 90% renewable electricity generation target, work with local government to set priorities for local infrastructure investment, and improve New Zealand's water quality and sustainability of water usage.
Having re-nationalised rail track and then rail operations into the Kiwi Rail state-owned enterprise, Labour intends to expand long-haul rail freight as part of its plan for a more sustainable transportation policy. It will also support creation of a electricified rail network for the greater Auckland metro area including the North Shore to expand commuter rail and ease road congestion in the country's largest urban area.
Like National, Labour will also accelerate the pace of investment in the broadband network to improve productivity in business, government, universities, hospitals, and schools.
To fund its long term infrastructure plan, Labour will issue long-term infrastructure bonds which have a tax-free inflation-indexed element. Additionally, public-private partnerships will be adopted where it is cost-effective to do so to reduce the burden on the taxpayer of financing projects where infrastructure bond funds are insufficient.
Monday, October 20, 2008
Inflation Surges as New Zealand General Election Nears
New Zealand's inflation rate, as measured by the consumer price index, spiked 1.5 percent in the September quarter.
The annual rate inflation is now 5.1 percent, clearly above the level of the inflation target of 1 to 3 percent over the medium term incorporated in the Policy Targets Agreement between the Minister of Finance and the Governor of the Reserve Bank.
Of course, the medium term inflation target has become secondary in the short run to the policy objective of combating the current economic recession and maintaining the stability of New Zealand's financial system in the present global crisis.
Inflation is expected to moderate as the global recession feeds through into the New Zealand economy and as oil prices in particular fall. Offsetting this trend may be the depreciation of the Kiwi dollar but importers will be under pressure to shave profit margins instead of passing on rising costs as domestic demand weakens.
The annual rate inflation is now 5.1 percent, clearly above the level of the inflation target of 1 to 3 percent over the medium term incorporated in the Policy Targets Agreement between the Minister of Finance and the Governor of the Reserve Bank.
Of course, the medium term inflation target has become secondary in the short run to the policy objective of combating the current economic recession and maintaining the stability of New Zealand's financial system in the present global crisis.
Inflation is expected to moderate as the global recession feeds through into the New Zealand economy and as oil prices in particular fall. Offsetting this trend may be the depreciation of the Kiwi dollar but importers will be under pressure to shave profit margins instead of passing on rising costs as domestic demand weakens.
Sunday, October 19, 2008
National Seeks Bipartisan Approach to Financial Regulation
National Party leader, John Key, has announced that his party is willing to engage in a bi-partisan approach to financial regulation policy with the Labour government in the run up to the General Election on 8 November.
Labour's announcement of the introduction of a deposit guarantee scheme for retail deposits last week caught National somewhat off guard but National quickly agreed in principle to the scheme and National finance spokesman, Bill English, received briefings from the Labour government.
Labour's Minister of Finance, Michael Cullen, has responded to Key by saying that it continues to provide briefings on the developing situation to Bill English on behalf of National.
Reflecting the high degree of Trans-Tasman economic integration between Australia and New Zealand, a policy divergence between the countries in recent days on the issue of whether wholesale deposits should also be guaranteed has emerged. New Zealand's government announced last week that interbank deposits would not be guaranteed but the Australian government has decided that such deposits will be.
National is signaling that it will not seek to make political capital out of a Labour government reversal of last week's position should Labour choose to provide a guarantee of interbank lending to harmonize this area of Trans-Tasman financial regulation policy.
Both Labour and National see the New Zealand banking system as sound given the strong balance sheets and more cautious lending policies of the major trading banks compared to their international counterparts. Nonetheless, the policy dilemma is that failing to guarantee the wholesale deposits while important economic neighbour Australia does, is to face the high risk of capital flight to guaranteed deposits in Australia and elsewhere in these uncertain economic times.
Once again, as previously pointed out here, emergency economic policy making procedures in New Zealand have proven to be inadequate in a rapidly changing global economic climate. The deposit guarantee policy as it has unfolded in the past week or so has left more questions unanswered than answered. This reveals a failure to think more than two or possibly three steps ahead.
Post-election a new government will need to launch a major review of the failure to activate and engage effective policymaking to cope with what have been demonstrated to be more external than domestic economic problems.
It is all very well to sit back with self-satisfaction and pride that New Zealand's economic house is in order, but when the economic crisis reaches your doorstep you had better have the sandbags, mops, and more affirmative instruments ready to go. And you best have thought out a train of steps ahead to respond to rapidly changing circumstances if the house threatens to be washed away.
Labour's announcement of the introduction of a deposit guarantee scheme for retail deposits last week caught National somewhat off guard but National quickly agreed in principle to the scheme and National finance spokesman, Bill English, received briefings from the Labour government.
Labour's Minister of Finance, Michael Cullen, has responded to Key by saying that it continues to provide briefings on the developing situation to Bill English on behalf of National.
Reflecting the high degree of Trans-Tasman economic integration between Australia and New Zealand, a policy divergence between the countries in recent days on the issue of whether wholesale deposits should also be guaranteed has emerged. New Zealand's government announced last week that interbank deposits would not be guaranteed but the Australian government has decided that such deposits will be.
National is signaling that it will not seek to make political capital out of a Labour government reversal of last week's position should Labour choose to provide a guarantee of interbank lending to harmonize this area of Trans-Tasman financial regulation policy.
Both Labour and National see the New Zealand banking system as sound given the strong balance sheets and more cautious lending policies of the major trading banks compared to their international counterparts. Nonetheless, the policy dilemma is that failing to guarantee the wholesale deposits while important economic neighbour Australia does, is to face the high risk of capital flight to guaranteed deposits in Australia and elsewhere in these uncertain economic times.
Once again, as previously pointed out here, emergency economic policy making procedures in New Zealand have proven to be inadequate in a rapidly changing global economic climate. The deposit guarantee policy as it has unfolded in the past week or so has left more questions unanswered than answered. This reveals a failure to think more than two or possibly three steps ahead.
Post-election a new government will need to launch a major review of the failure to activate and engage effective policymaking to cope with what have been demonstrated to be more external than domestic economic problems.
It is all very well to sit back with self-satisfaction and pride that New Zealand's economic house is in order, but when the economic crisis reaches your doorstep you had better have the sandbags, mops, and more affirmative instruments ready to go. And you best have thought out a train of steps ahead to respond to rapidly changing circumstances if the house threatens to be washed away.
Friday, October 10, 2008
Roundup on the Economic Crisis
Former Governor of the Reserve Bank & former Leader of the National Party, Don Brash, on the current global financial crisis, its impact on New Zealand, monetary policy settings, deposit insurance, and fiscal policy.
The second interview is with John Yeabsley, Director of the New Zealand Institute of Economic Research, the premier economic research institute in the country, on the Institute's latest set of forecasts and business survey.
Video is from the TVNZ breakfast show, October 8 or 9, 2008.
A virtual chocolate fish or buzz bar for the first commenter to identify who the figure is looking over Don's shoulder...
The second interview is with John Yeabsley, Director of the New Zealand Institute of Economic Research, the premier economic research institute in the country, on the Institute's latest set of forecasts and business survey.
Video is from the TVNZ breakfast show, October 8 or 9, 2008.
A virtual chocolate fish or buzz bar for the first commenter to identify who the figure is looking over Don's shoulder...
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