The full pdf version of the Weekly Overview is contained here.
Monetary Policy Unchanged
Thursday June 9th 2011
Our view on NZ growth remains firmly positive, but for now one still struggles to find data outside of booming merchandise export receipts to show strong growth. In particular short term construction prospects remain weak and businesses are cutting back investment except on commercial vehicles. Still, with our monthly survey showing confidence in the economy a year from now at a record high we feel on reasonably safe growth with our warnings regarding tightening labour availability, rising inflationary pressures, tightening monetary policy from late in the year, and eventually firmly improving housing market activity.
The main event of interest with regard to the NZ economy this week was a rise in the NZD above 50 pence and to a post-float record against the greenback in response to a variety of factors. There was initially last week’s news about $6bn of Chinese investment in NZ, then a very strong report on export growth in April, further commodity price gains reported in May, and soaring business confidence as we reported over three weeks ago in our monthly survey.
This week I’ve been meeting people in both Ireland and London and the picture one receives is of two economies still struggling – one with a weak housing market, high unemployment, high government debt, fiscal restraint slowing growth, depressed consumer sentiment, banks unwilling to lend and many businesses unwilling to borrow – and the other place is Irish. The big differences lie in Ireland’s unemployment rate being twice the UK’s at about 15%, the extent of pullback in housing construction and remaining housing over-supply being phenomenally greater in Ireland than in the UK, and the fiscal impact of bank bailouts being much greater in the Emerald Isles.