New Zealand is an indebted nation that persistently runs current account deficits. This raises the questions, what is a current account deficit and should we be concerned about it?
Our work in the news
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Here is list of Infometrics’ latest mentions in the media.
Purchasing power parity (PPP) exchange rates are the rates of currency conversion that eliminate the differences in price levels between countries. In other words, the exchange rate that would convert the buying power of NZ$100 in New Zealand to the same buying power in another country.
The rise and rise of commodity prices reflects an economic revolution occurring in New Zealand’s backyard. The breadth of this commodity boom is impressive and is being driven by two fundamental forces – population and income growth. That suggests that high commodity prices may persist for several more years, and possibly even a decade or two. In some cases the lift in prices could be permanent.
The vanishing surpluses in Michael Cullen’s 2008 Budget have not only scuttled his reputation for fiscal conservatism, but also sounded the death knell for one of Cullen’s key policy legacies – the New Zealand Superannuation Fund.
For a mere $708m (or about $165 each) we all took proud ownership this week of one slightly used rail and ferry network. Add to this cheque, the money needed for track maintenance and upgrades of rolling stock and the public investment will be well in excess of $1 bn.
One of the disconcerting factors in theReserve Bank’s Monetary Policy Statement released earlier this month was theinclusion of forecasts for inflation excluding the effects of food and energyprices. Price rises from these two sources are responsible for more than halfof the lift in the CPI over the last year, so if we exclude these components,inflation looks much more respectable at just 1.6%pa.
Following the Reserve Bank’s Monetary Policy Statement earlier this month, some economists are questioning the need for the Bank to maintain a strict inflation target. Some have gone so far as to say that inflation targeting has failed to improve New Zealand’s economic wellbeing and should be done away with altogether. Such attitudes are scary – inflation targeting by a credible central bank is a vital part of sound economic management.
In the next few months we can expect economic policies to start being released by political parties. Last week the Green Party kicked things off with a proposal to levy commercial use of water.
Obesity is seen as a looming health problem. That may or may not turn out to be the case, but what is more certain is that the health service has been gorging itself on fiscal surpluses for almost a decade, and one area where the flab seems most obvious is governance – 21 district health boards and their entourages. Before we go there let’s just take a quick look at the trend in health spending.
Tax cuts have finally been granted, albeit modest ones. From October full time earners will pay between $12 and $28 dollars per week less in tax. Welcome, but hardly cause for wild celebration.