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Recent releases

Trade balance starts to tick downwards In seasonally adjusted terms, the trade balance in June fell into deficit for the first time since September last year. Although the value of exports remains 4.8% higher than a year earlier, falling world prices for dairy and forestry products have seen export values drop over recent months. Meanwhile the uptick in the domestic economy has seen June import values lift 8.7% above their level a year earlier. We expect these trends to continue, leading to a further deterioration in the trade balance over the next half of the year. Read more

Reserve Bank lifts OCR to 3.5% The Reserve Bank raised the official cash rate another 25 basis points to 3.5% this July. The Bank stated that now is the time to take stock of the OCR hikes it has put in place.  This implies that, outside of a sudden strengthening in economic indicators or a sharp depreciation in the currency, a rate hike before December unlikely. Read more

Commentary

Pausing for breath as more uncertainty appears After hiking the official cash rate to a five-and-a-half-year high of 3.5%, the Reserve Bank has decided that now is the time to take a breath, stop hiking, and see how this year’s tightening will affect the broader New Zealand economy. With dairy prices falling sharply at the same time as capacity pressures are intensifying, the Bank is trapped between a rock and a hard place when it comes to setting the official cash rate. So waiting for information about which trend will dominate the economic outlook appears to be a good move by the Bank.
Can we improve the election process to get better policy? Despite this general level of comfort with New Zealand’s political system there is always room for improvement. My general concern is that the quality of policies should be as high as possible. By this I mean that policies introduced are most effective in delivering the intended outcomes and that unintended side-effects are minimised. I think it is totally appropriate that policies reflect the philosophy of the elected government and the interests of the electorate, but it annoys me when policy does not look like it will be as effective as it could be, or delivers outcomes in a costly way. Read more.

Dispelling some myths about regional economic performance There has been talk of late that the gap between the economic performances of our provinces and major urban environments is widening. However, even though these types of comments have been well intentioned, generalised conclusions of this nature are unsubstantiated by economic data and unhelpful from a policy perspective. Apart from some isolated cases of regional struggles, the majority of provincial economies have outperformed major cities over the past decade. Read more.

Latest Forecasts

Venturing out of the shadows

The New Zealand economy has well and truly proven it is undead, recording three consecutive quarters of growth above 1.0% for the first time since 2003/04. Strong growth is set to continue over the next two years as domestic demand remains buoyant, the Canterbury rebuild reaches its peak, and export incomes hold at relatively high levels.