Welcome to the October 9 2008 editions of the BNZ Weekly Overview and Offshore Overview.
The deterioration in global financial markets has continued strongly over the past week with collapsing sharemarkets, major weakness in the Kiwi dollar at one point below 58.0 cents last night, and central banks forced to inject more money into their national financial systems plus cut interest rates. Australian interest rates have been cut 1% and we expect probably a 0.75% reduction from our central bank on October 23.
During the week we have received confirmation that the surge last month in business and consumer confidence in New Zealand was a blip with sentiment falling away relatively strongly in our own survey and others during the week.
Prospects for the New Zealand economy have deteriorated in light of recent events offshore. While the earlier than expected fall in the Kiwi dollar and interest rates will please many businesses, for the next 12 months these positives will be offset by the global economy probably going into recession. Prospects for tourism and residential construction look especially poor.
In both the Weekly Overview and Offshore Overview we attempt to explain in simple terms what has been happening overseas.