Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

"Solid Growth Replaces Confidence Jitters"

"Solid Growth Replaces Confidence Jitters" According To BERL

According to independent economic forecasters BERL, the period of export-led expansion is set to continue this year, in stark contrast to the confidence jitters experienced last year.

"The forthcoming year sees the prospect of continued expansion in economic activity, mirrored through robust growth in commodity, merchandise exports and tourist arrivals, rising employment and falling unemployment numbers, despite last year's 'confidence crisis' ", commented BERL Forecasts Editor Dr Ganesh Nana.

In releasing their latest quarterly forecasts for the NZ economy, BERL are guardedly optimistic, although negatives remain on the domestic scene - with the building industry in particular looking at another weak year. In addition, with declining unemployment and skill shortages fueling inflationary concerns, the Reserve Bank is likely to continue its cautious approach in setting interest rates. Despite the one-percentage-point reductions in US and Australian interest rates this year (with the likelihood of more to come), the most NZers can look forward to is a quarter-point, or at best a half-point, reduction through this year.

Clearly, the global situation is of concern to the NZ's outlook, but we expect the US economy to quickly return to growth with the help of interest rate cuts coupled with the prospect of large tax cuts. Also of concern is the quickly deteriorating picture in Australia, although the impact of relaxed monetary policy should ensure any downturn is only short-lived.



Furthermore, uncertainty in Japan is likely to see strength in the US$ continuing. "This supports our expectation that the Kiwi will remain below US45 cents over 2001 and help ensure solid export returns over the coming year", said Dr Nana.


Summary sheet (page 3) from March 2001 BERL Forecasts

THE PICTURE
March 2001
The NZ economy, despite the confidence 'jitters' of last year, is set to continue its period of moderate prosperity based on an export-led expansion. Overall, with the December 2000 and March 2001 quarters recording quarterly increases in activity of the order of 1% each, GDP for the March 2001 is set to average 2.8% above that of a year earlier.

We forecast employment growth at a solid but unspectacular rate of 35,000 jobs a year. This represents annual increases near the 1.8%pa mark leading to unemployment under 5% by June 2002 and close to 4.5% subsequently.

New Zealand short-term interest rates however will stay well above global rates as the continued growth combine with skill shortages, wage demands and low unemployment to see the monetary authorities remaining on inflation alert. We expect consumer price inflation to remain closer to the 2.5%pa rather than the 1.5%pa mark.

Despite the favourable differential between NZ and global interest rates, the NZ exchange rate will remain constrained near, but under, the US 45 cent level, until late-2001; before gradually appreciating towards US 50 cents over the remainder of the 3-year forecast horizon.

Weighing on the Kiwi in the medium term is a continued current account imbalance, a weak Australian growth outlook, near-term growth uncertainty for NZ, subdued NZ corporate profitability and the US's stated 'strong-dollar' policy. We expect further US interest rate cuts this year are matched by others. These moves see global growth, although slowing, continuing throughout calendar 2001. Given this scenario we see little evidence to suggest the Greenback will be heavily (if at all) sold down and hence find little to support the notion that the Kiwi will dramatically appreciate this year.

The current account deficit is expected to improve significantly over calendar 2001 as the goods balance recovers markedly from its recent depths. The services balance improves dramatically as tourist operators revel in expanding visitor numbers. Overall, the deficit remains steady over the medium term at around $4.5bn, or 3.5% to 4% of GDP, as the net investment income deficit continues to dominate.

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Electricity Market: Power Panel Favours Scrapping Low-Fixed Charges

An independent panel reviewing electricity prices favours scrapping the government’s low-user fixed charge regime, banning the use of prompt-payment discounts, and requiring greater disclosure of the profit split between the retail and generation arms of the major power companies. More>>

ALSO:

Bottomless Oil And Zero Climate Cost: Greenpeace Not Big On PEPANZ Gas Ban Report

The NZIER report commissioned by oil industry body, PEPANZ, claims the oil and gas ban issued by the Government last April could cost the the New Zealand economy $28 billion by 2050... But Greenpeace says the figures in the report are based on false assumptions and alternative facts. More>>

ALSO:

Two Queensland Fruit Flies And A Different One In Otara: Devonport Fruit And Veg Lockdown

Work continues at pace on the biosecurity response following the discovery last week of one male Queensland fruit fly in a surveillance trap in the Auckland suburb of Devonport. More>>

ALSO:

Digital Services Tax: Government To Plan Tax On Web Operator Income

New Zealand is to consult on the design of changes to tax rules which currently allow multinational companies in the digital services field to do business here without paying income tax. More>>

ALSO: