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BNZ Weekly Overview April 14

BNZ Weekly Overview.

Many thanks to those who responded in our monthly survey last week. The results were significant because they showed a strong rebound in sentiment following the understandable decline in the early –March survey which captured concerns following the February 22 earthquake in Christchurch. The latest result suggests it remains reasonable to keep believing that growth in the economy will improve as the year goes by – and this week we in fact received some reasonably good data.

Core retail spending increased 0.9% in March after falling 0.6% in February – though there is a risk this result was biased upward by people replacing goods lost or damaged in the earthquake. Sales of dwellings around the country rose a seasonally adjusted 5.4% excluding Canterbury in March with 10.5% growth in Auckland which we believe is leading the housing cycle upward this time around.

We have also learnt that there was firm 16% growth in the trend estimate of online jobs advertised in March taking the total to 29.5% ahead of a year earlier.

And with these positive numbers coming out we have seen the Kiwi dollar rising against a generally declining greenback so this evening the NZD is sitting over US 79 cents compared with 77.8 cents a week ago and a low of 72 cents on March 18. Against the British pound we have risen to 48.6 pence from 47.7 last week and 44.5 on March 18.

We have also seen medium to long term wholesale borrowing costs rise about 5 – 15 points over the week with a few more businesses locking in some funding at fixed rates and the markets starting to come around to our view that inflationary pressures in NZ will eventually drive the Reserve Bank to tighten monetary policy around the turn of the year. We repeat our suggestion to businesses that they consider some interest rate cover given that a lot of bad news has been factored into current borrowing costs and the risk is these rates now move upward over 2011-12 at uncertain speed. For home owners the cost of fixing however still looks a bit high – though conservative borrowers might want to consider a portion perhaps locked in at two years.

At this week we have added the fourth paper in our series examining the specific areas in which international comparative surveys find our economy to be deficient.

We have also added a paper examining the way in which our soaring terms of trade mean that as a country we are getting much richer – though the GDP per capita numbers do not capture this.

Audio from the talk I gave at the Sustainable Future Institute conference at Te Papa on March 30 is also available at

Next week we will load our April Labour Market report.


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