Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search


NZ dollar falls as recession deepens

NZ dollar falls as recession deepens, dim prospects for New Year

By Paul McBeth

Dec. 24 – The New Zealand dollar fell after data confirmed the economy sank deeper into recession, heightening concern that it will continue to spiral downward next year.

New Zealand’s gross domestic product for the third quarter showed activity shrank by 0.4%, twice as much as the Reserve Bank of New Zealand’s forecast. Bank of New Zealand economists predict the current quarter will show a contraction of 0.6%, and the first quarter of 2009 will show a further reduction. The widening of the current account deficit to 8.6% of GDP is expected to push the New Zealand dollar lower and reduce domestic demand.

“The climate and challenges we’re facing in 2009 are a risk to the kiwi,” said Mike Symonds, head of sales and foreign exchange at BNZ. During the holiday period, “the kiwi could go lower – to the 55.50 area.”

The kiwi tumbled to 56.27 U.S. cents from 57.25 cents yesterday and dropped to 51.46 yen from 51.60 yen. It was down to 83.16 Australian cents from 83.81 cents yesterday, and fell to 40.60 euro cents from 40.79 cents.

Symonds said the kiwi may trade between 56.50 U.S. cents and 57 cents today, with activity on the currency markets “falling sharply” ahead of Christmas.

The weak GDP data will put more pressure on the central bank to revive the economy by continuing to cut the official cash rate early next year. Governor Alan Bollard has slashed the OCR 325 basis points to 5% after he embarked on the steepest series of cuts since its inception in 1999.

Central banks and policy makers around the world have been moving to protect their economies from the global economic slump that is refusing to abate. BNZ currency strategist Danica Hampton predicts the central bank will cut rates by at least 50 basis points when it meets in January.

The U.K economy fell deeper into recession, reporting a 0.6% contraction in GDP in the third quarter, its biggest decline since 1990. The Bank of England, which has already cut its benchmark rate to 2%, and Prime Minister Gordon Brown are struggling to shore up the economy as access to credit continues to tighten. The pound slipped against the U.S. dollar to $1.4742 from $1.484. One New Zealand dollar buys 38.41 pence, down from 38.55 yesterday.

Further signs of the ongoing credit crisis came with U.S. housing sales in November plummeting 7.6%, the biggest fall in 20 years. Resale median prices sank 13%, the largest slump since records began in 1968, and probably the largest since the Great Depression in the 1930s, the National Association of Realtors said.



© Scoop Media

Top Scoops Headlines


Keith Rankin: Narrow Vision: Subsidised Cars And Street Immunity
Problems make the world go round. Many of us – maybe the majority of workers, and certainly the majority of well-paid workers – earn our living addressing problems. A problem-free world would represent a major crisis for modern social-capitalism. (Yet standard economic theory continues to present the productive economy as a mechanism for 'satisfying wants', as distinct from 'addressing problems... More>>

Biden In Tokyo: Killing Strategic Ambiguity
Could it have been just another case of bumbling poor judgment, the mind softened as the mouth opened? A question was put to US President Joe Biden, visiting Tokyo and standing beside Japan’s Prime Minister Fumio Kishida: “You didn’t want to get involved in the Ukraine conflict militarily for obvious reasons. Are you willing to get involved militarily to defend Taiwan if it comes to that?” The answer: “Yes. That’s a commitment we made.”.. More>>

Dunne Speaks: Robertson's Budget Gamble On Treasury
The popular test of the success or failure of Grant Robertson’s fifth Budget will be its impact on the soaring cost of living. In today’s climate little else matters. Because governments come and governments go – about every six to seven years on average since 1945 – getting too focused on their long-term fiscal aspirations is often pointless... More>>

Digitl: Infrastructure Commission wants digital strategy
Earlier this month Te Waihanga, New Zealand’s infrastructure commission, tabled its first Infrastructure Strategy: Rautaki Hanganga o Aotearoa. Te Waihanga describes its document as a road map for a thriving New Zealand... More>>

Binoy Kampmark: Leaking For Roe V Wade
The US Supreme Court Chief Justice was furious. For the first time in history, the raw judicial process of one of the most powerful, and opaque arms of government, had been exposed via media – at least in preliminary form. It resembled, in no negligible way, the publication by WikiLeaks of various drafts of the Trans-Pacific Partnership... More>>

The Conversation: Cheaper food comes with other costs – why cutting GST isn't the answer

As New Zealand considers the removal of the goods and services tax (GST) from food to reduce costs for low income households, advocates need to consider the impact cheap food has on the environment and whether there are better options to help struggling families... More>>