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Balance Of Payments Improvement Unsurprising

15 December 2000

With commodity prices now at the peak in the cycle, the improvement in the current account deficit should be more dramatic than is currently forecast, National's Finance Spokesman Bill English said today

The Balance of Payments result for the September quarter showed the improvement most commentators were expecting. A significant improvement is expected in the December quarter, when the second ANZAC frigate drops out of the annual calculations. Gradual improvement is expected in subsequent quarters.

"Current expectations are centering on an improvement in the current account deficit to around 4.5% of GDP over next two years.

"That level of current account deficit still leaves New Zealand vulnerable to any significant downturn in commodity prices.

"Indeed there are already expectations of recovery in the New Zealand Dollar next year, combined with an expected slowdown in trading partner growth. Both of these factors will have a negative impact on commodity returns.

"In its recent Monetary Policy Statement, the Reserve Bank mentioned the lack of responsiveness of the tradeables sector to the record low level of the New Zealand Dollar.

"This highlights the need for policies which will address New Zealand structural balance of payments problem, and enhance New Zealand's international competitiveness, rather than detract from it," Mr English said.

Ends


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