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Molesworth & Featherston (Weekend) – March 25 2006

Molesworth & Featherston - Weekend Update edition


Business and Political News
25 MARCH 2006
molesworthandfeatherston.co.nz

In the latest edition:

Direct Link To This Week's Weekend Update Edition:
http://molesworthandfeatherston.info/pdf/MandF25Mar06L.pdf

ROLLING POLL

There is no change to the rolling average poll of polls this week:

Percent Seats
Labour 42.15 54
National 41.52 53
Greens 6.59 8
Maori 1.72 4
United Future 1.60 2
Act 1.14 1
Progressives 0.18 1
NZ First 3.61 0

It is a 123-seat Parliament with two Maori seats and one Progressive seat as overhangs.

Economy

Crunch

The economy was near as darn it to a minor recession in the last six months of last year.

Economists say a recession is two consecutive quarters of negative growth - we missed by the smallest possible margin. Figures released on Friday showed the economy contracted 0.1 percent in the last three months of 2005. It grew only 0.1 percent in the three months before that, meaning the economy overall lost ground in the second half of last year.

The December quarterly contraction was the first since 2000. The GDP figures followed the release of hideous current account figures on Thursday: We spent $13.7 billion more overseas last year than we earned - 8.9 percent of GDP or more than $3,300 per person. The deficit was up from $9.8 billion, or 6.7 percent of GDP, in the previous year.

Most of the increase resulted from an increase in the value of imported goods, Statistics New Zealand said.

The overseas deficit is specially worrying because it has been expanding while the economy has been softening. It's common for a strongly growing economy to run up the current account deficit, because a growing economy sucks in imports to fuel its growth. But when the deficit expands quickly during a downtown it is a sure sign of imbalances in the economy. It also signals a ‘correction’ is ahead - more jobs lost and more business failures as the economy cools.

The last time New Zealand recorded a current account surplus was in 1973. Although we nearly recovered to balance at the end of the eighties we have been on a downward trend since the Reserve Bank Act was passed. Before 1973, New Zealand never had a post-war deficit over five per cent of GDP. Since then a recession has followed each spike in the deficit - 1975, 1986, 1997 - with the only exception only 2000's single-quarter slowdown.

Most commentators believe the economy is probably growing slightly faster now: Economists NZIER - who have tipped more of a slowdown than government agencies reckoned - say growth will slow over the coming year to 1.4 percent annual growth in 2006-07.

************

The Weekend Update is a complimentary, condensed edition of the paid-subscription only Governor’s Edition published last Tuesday.

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Direct Link To This Week's Weekend Update Edition:
http://molesworthandfeatherston.info/pdf/MandF25Mar06L.pdf

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