New Zealand and World Economy Overview

Following on from my previous posting on the Outlook for the New Zealand economy, here is some more commentary and data that might be useful for the forthcoming CIE and NCEA exams.

Outlook for the New Zealand Economy (from Parliamentary Economic Review)
The economy is forecast to remain relatively weak over the short-term, with households and businesses paying down debt rather than consuming and investing in capital. Rebuilding activity in the Canterbury region will provide a stimulus to growth over the next year or so, as will rising export receipts on the back of high commodity prices and increased demand from Australia and China in particular. However, the high New Zealand dollar against some currencies will be of concern for some exporters (but favourable for importers). The unemployment rate is forecast to ease gradually over the coming year. Most economic commentators believe that the Reserve Bank will hold off raising its official cash rate until next March. A further round of quantitative easing in the United States is expected, which will place downward pressure on the United States dollar (and consequently, further upward pressure on the New Zealand dollar).

Outlook for World Economy (from IMF Oct. Report)
Thus far, economic recovery is proceeding broadly as expected, but downside risks remain elevated. Most advanced economies and a few emerging economies still face large adjustments. Their recoveries are proceeding at a sluggish pace, and high unemployment poses major social challenges. By contrast, many emerging and developing economies are again seeing strong growth, because they did not experience major financial excesses just prior to the Great Recession. Sustained, healthy recovery rests on two rebalancing acts: internal rebalancing, with a strengthening of private demand in advanced economies, allowing for fiscal consolidation; and external rebalancing, with an increase in net exports in deficit countries, such as the United States, and a decrease in net exports in surplus countries, notably emerging Asia. The two interact in strong ways. Increased net exports in advanced economies imply higher demand and higher growth, allowing more room for fiscal consolidation. Strengthened domestic demand helps emerging market economies maintain growth in the face of lower exports.

Central Bank interest rates (13th Oct 2010)





Exchange Rates – NZ$1 as at 13th Oct 2010





Oil – 13th Oct 2010
Brent crude: US$83.98 per barrel

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