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

 


Chinese slowdown biggest external threat to NZ growth: IMF

Chinese slowdown biggest external threat to NZ growth, says IMF

By Paul McBeth

April 1 (BusinessDesk) - The risk of a sharp slowdown in China’s economy is the biggest external threat to New Zealand’s growth, due to its export exposure across the Asia region, according to the International Monetary Fund.

New Zealand’s growth prospects have improved in the near-term with strong business and consumer confidence and high commodity prices, though the growing reliance on China buying kiwi exports is a worry if the world’s second-biggest economy started struggling, the IMF says in its concluding statement on the nation.

“New Zealand’s growth prospects remain exposed to external developments, and in particular, a sharp slowdown in growth in China,” the IMF said. “Any adverse development in the region would have a substantial impact on New Zealand’s terms of trade.”

The IMF warning echoes a similar fear in the Reserve Bank’s November financial stability report, which cited a “disorderly slowing” in China as a potential risk to the local financial system, which could cause a fall in commodity prices “significantly impacting the indebted parts of the agriculture sector.”

China trumped Australia to become New Zealand’s biggest trading partner last year, accounting for about 22 percent of exports and supplying about 17 percent of imports. Last month Prime Minister John Key and Chinese President Xi Jinping set a goal for the nations to reach $30 billion of two-way trade by 2020.

The IMF said if China did start slowing down, a weaker New Zealand dollar would help ease the transition, provided the world’s major central banks continued to scale back their quantitative easing programmes. If they didn’t and the kiwi dollar remained elevated, “a bumpy exit and repeated episodes of financial market volatility could lead to widespread contagion and raise the cost of New Zealand banks’ offshore borrowing,” it said.

The IMF estimated New Zealand’s currency was overvalued, despite the 40-year high terms of trade, and that the nation’s non-agricultural exporters “will need to continue to adapt by further increasing efficiency to remain competitive.”

Rising house prices in New Zealand were still a concern for the IMF, though it was upbeat about the Reserve Bank’s response by limiting low equity mortgage lending, and its shift to tighter monetary policy. The IMF has previously estimated New Zealand housing was overvalued by about 25 percent.

Both the Reserve Bank and government have policy space to respond to any economic shocks, and the IMF said measure to address housing supply “will continue to play an important role in containing price pressures and increasing affordability.”

Speaking ahead of the IMF report’s release yesterday, Prime Minister John Key said he was “not of a view there will be a sharp slowdown in China.”

The Chinese government had cash reserves of US$4 trillion available that would allow it to undertake financial system bail-outs, if necessary, and had “a number of levers” it could use to calm its financial system.

“You will more defaults and you may well see a slowdown in credit” to prevent a credit bubble forming, but he expected China “to achieve growth of 7 to seven and a half percent.”

(BusinessDesk)


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

ETS Review: Modelling Documents Released

Three technical documents are being released to help New Zealanders engage with the Emissions Trading Scheme (ETS) review, Climate Change Minister Paula Bennett says. More>>

ALSO:

Northland: Govt Plan Targets Transport, Web, Maori Assets

The government has released a 10-year plan to attract investors and lift economic growth in Northland, a region that perennially underperforms the rest of the country even while being endowed with natural beauty, productive land, minerals, a potential workforce, scope for manufacturing, forestry and aquaculture, and proximity to Auckland. More>>

ALSO:

Statistics: Unemployment Rate Falls To 5.3 Percent

The unemployment rate fell to 5.3 percent in the December 2015 quarter (from 6.0 percent), Statistics New Zealand said today. This is the lowest unemployment rate since March 2009. There were 16,000 fewer people unemployed than in the September ... More>>

ALSO:

Employment: Labour Urges Talley’s To End AFFCO Lockout

Labour has urged Talley’s to resolve the ongoing industrial dispute with AFFCO workers which is having a severe effect on the employees, their families and their communities, Labour’s Workplace Relations spokesperson Iain Lees-Galloway says. More>>

ALSO:

Three Kings: Govt To Oppose Appeal Blocking $1.2B Auckland Housing Plan

Environment Minister Nick Smith and Housing New Zealand have joined legal proceedings in support of Auckland Council and Fletcher Building opposing a bid by community groups to only allow low-rise housing in a $1.2 billion housing redevelopment on the disused site of the Three Kings quarry. More>>

ALSO:

Transport: Jetstar Expands Regional Network With Three New Routes

More New Zealanders than ever before will have access to Jetstar’s affordable flights when new services take off today from Auckland to New Plymouth and Palmerston North, and Nelson to Wellington. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news