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

 


NZ Fundamentals Okay – Provided World Recovers

Headline article from the BNZ Weekly Overview of December 2.

NZ Fundamentals Okay - Provided World Recovers

In theory all the bad news we have been receiving from overseas in the past few months should not just have depressed business and consumer confidence as we saw in the middle of this year. We should still be in that depressed state given 40% of our national income comes directly from the exporting sector. After all, the Consensus Economics surveys conducted monthly show that on average our top 14 trading partners are expected to grow only 3% next year from about 2.6% this year. This 3% forecast is down from 3.7% as recently as July, below the 3.5% long term average, and there is a risk of a further slight reduction in this expectation.

But business and consumer confidence levels have been rising in recent months - since September in the case of the NBNZ Business Outlook survey and October for the One News Colmar Brunton poll of consumers. The consumer confidence measure now stands at +13%, up from 7% in September and just below the long term average of 15%. If we knew nothing else we would have to forecast growth in retail spending over the coming year of around 3.0%. For businesses the NBNZ measure stood at an even 0% in November, well up from -31% in August but below the long term average of around 25%.

Yet even this not so flash indicator hides some interesting positives. Employment intentions in November were a net 11 positive compared with a 9% average. In fact these intentions only fell to +6% in August when business confidence plunged in response to world growth worries. And investment intentions in November were a nice +18% - on average and up from 12% in August.

These latter two indicators are suggestive of employment growth of over 2% and growth in plant, machinery & equipment investment - of which the country seems to need a considerable amount - of about 7%.

Why the improving confidence levels recently? Here are a few suggestions.

- Reduced fixed interest rates.

- Removal of expectations that the Reserve Bank will be raising interest rates again in the near future.

- Consumer happiness about a rising exchange rate.

- Booming population growth lifting retailing, housing etc.

- Rising house prices up 8.5% the past year.

- A tight labour market boosting job security.

- Widening margins as businesses price to reflect capacity constraints.

- Some recovery in international dairy prices plus good sheepmeat and to a lesser extent beef prices.

So does the recent rise in confidence mean our economic growth rate will remain near the 3.5% achieved in the year to June? We don’t think so. There are some strong negative forces in play, and while we expect the positives to dominate it is reasonable to expect some slowing in economic growth toward 2.5% over 2003 - then up over 2004 provided world growth accelerates. Factors which will retard growth in the coming year include the following.

- Recent bad weather which it has been estimated will reduce farm incomes by $400m this season, plus whatever other negative effect will come from the El Nino weather pattern.

- The feed-through into the cities around mid-2003 of the expected 25% or so fall in dairy incomes and approximately 10% fall in sheep and beef farm incomes.

- A rising exchange rate now up almost 15% on a trade weighted basis from where it was a year ago with the risk of further appreciation.

- Shortages of resources such as labour and plant and machinery.

- The clear risk of further destabilisation in the world economy from any military action which may occur in Iraq as well as continuing terrorist attacks.

- Ending of the recent period of catch-up consumer spending on durable goods.

The main negatives stem from the export sector, and unless we see this sector turn upward from the latter part of 2003 the domestic driving forces of our economy will probably have run out of steam. If this looks like happening then around the middle of next year we will see the Reserve Bank cutting interest rates. If however it looks highly probable that world growth will accelerate firmly then the next monetary policy change will be a tightening. The odds slightly favour an easing with a key factor in this minor bias being the rising exchange rate.

ENDS


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Onetai Station: Overseas Investment Office Puts Ceol & Muir On Notice

The Overseas Investment Office (OIO) has issued a formal warning to Ceol & Muir and its owners, Argentinian brothers Rafael and Federico Grozovsky, for failing to provide complete and accurate information when they applied to buy Onetai Station in 2013. More>>

ALSO:

Tomorrow, The UN: Feds President Takes Reins At World Farming Body

Federated Farmers president Dr William Rolleston has been appointed acting president of the World Farmers’ Organisation (WFO) at a meeting in Geneva overnight. More>>

ALSO:

I Sing The Highway Electric: Charge Net NZ To Connect New Zealand

BMW is turning Middle Earth electric after today announcing a substantial contribution to the charging network Charge Net NZ. This landmark partnership will enable Kiwis to drive their electric vehicles (EVs) right across New Zealand through the installation of a fast charging highway stretching from Kaitaia to Invercargill. More>>

ALSO:

Watch This Space: Mahia Rocket Lab Launch Site Officially Opened

Economic Development Minster Steven Joyce today opened New Zealand’s first orbital launch site, Rocket Lab Launch Complex 1, on the Mahia Peninsula on the North Island’s east coast. More>>

Earlier:

Marketing Rocks!
Ig Nobel Award Winners Assess The Personality Of Rocks

A Massey University marketing lecturer has received the 2016 Ig Nobel Prize for economics for a research project that asked university students to describe the “brand personalities” of three rocks. More>>

ALSO:

Nurofen Promotion: Reckitt Benckiser To Plead Guilty To Misleading Ads

Reckitt Benckiser (New Zealand) intends to plead guilty to charges of misleading consumers over the way it promoted a range of Nurofen products, the Commerce Commission says. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news