NZ dollar should be 15% lower to cut current account: IMF 8 Jun 2012
- TSB Bank writes off $53.9 mln Solid Energy debt Business
- PGC posts 1H loss, writes down Perpetual receivable Business
- MARKET CLOSE: NZX 50 rises to a record; Genesis, PFI gain Business
- NZ dollar heads for 0.4% weekly gain; USD poised to rise Business
- Fonterra's Glencoal says Waikato mine delayed, not on hold Business
- Solid Energy delays 1H report on weaker coal price forecast Business
- Bathurst sinks into the red in 1H, waiting for coal price Business
- NZ business confidence gains in Feb as ag sector gets happy Business
- Countdown boosts 1H earnings 2.9% on cost cuts, volume gains Business
- UPDATE: US wine-drinkers trading up, Delegat says Business
The New Zealand dollar needs to be 15 percent lower to bring the nation's current account deficit to a more sustainable level, according to the International Monetary Fund.
New Zealand's external vulnerability is cited as the key medium-term issue for the country, which will need a better national savings rate and reduced reliance by banks on foreign funding, according to the IMF's concluding statement on the economy. That reliance on global funding assumes the Canterbury rebuild gathers pace and global interest rates get back to more normal levels.
The global lending agency sees New Zealand's current account deficit rising to 7.1 percent of gross domestic product and net external liabilities to 84.8 percent of GDP by 2016. That's worse than the Treasury's latest forecasts for a 6.9 percent current account deficit and 80.8 percent net foreign liability deficit in the 2016 March year.
"Staff analysis suggests that the New Zealand dollar is currently stronger than is consistent with a level of the current account deficit that is more sustainable over the long term," the report said. To stabilise external liabilities at the 2009 level, "the New Zealand dollar would need to be about 15 percent weaker than its current level."
New Zealand's trade-weighted index fell to 69.83 this morning from 70.08 yesterday. The Budget economic forecasts project the TWI falling to 63.0 in 2016, the end of its forecast period.
In April, the IMF preliminary statement on New Zealand backed the government's plan to get its own books back in the black by 2014/15, which will unwind fiscal stimulus as the Canterbury rebuild gets under way and offer headroom in the event of another global meltdown.
The IMF held to the same line in its concluding statement, saying lower net government debt will help contain the current account deficit over the medium term and reduce external vulnerability by lifting the national saving rate.
However, it questioned whether New Zealand's unique position, in that most of its external debt is private rather than public, raises the question "whether this would limit the ability of budget deficit reduction in the case of New Zealand to bring about a reduction in foreign liabilities more broadly."
The IMF also backed the government-appointed Savings Working Group's recommendations to shift more of the tax base to consumption over the medium-term and to index tax on interest income to inflation.
It said New Zealand's economy continues to grow at a modest pace, with GDP forecast to expand 2.3 percent in 2012, rising to 3.2 percent in 2013, though the size and timing of the recovery is uncertain due to the delays in the Canterbury reconstruction.
Europe's financial woes and a slowdown in the Chinese and Australian economies are seen as the biggest risks, though New Zealand has space to respond to adverse shocks, the report said.
The IMF said there is a medium likelihood of declining export demand and deteriorating terms of trade, which would reduce GDP growth in New Zealand. That could lead to a fall in household income, which would lead to lower house prices sap consumer demand and growth, it said.
If that downside scenario occurred, the IMF estimates it will trim half a percentage point from 2012 GDP growth and 1 percentage point in 2013.
25 Feb 2015 News
PM saddened at passing of Dame Thea Muldoon Prime Minister John Key today expressed his sadness at the passing of Dame Thea ... more
25 Feb 2015 News
A Bill to better protect children from sexual exploitation passed its second reading in Parliament last night. The... more
25 Feb 2015 Business News
By Suze Metherell Feb. 25 (BusinessDesk) - New Zealand shares rose to a record, led by Xero after it raised $147 million from two... more
25 Feb 2015 Business News
Article - BusinessDesk Tourism Holdings beats 1H guidance on reduced fleet, wider margins By Suze Metherell Feb. 25 ... more
25 Feb 2015 Lifestyle
Dunedin businesses have given their full support to the Otago Polytechnic Education Open 2015. The event will be taking place at... more
25 Feb 2015 Lifestyle
Surfbreak Protection Society Duke Kahanamoku – 100 years of Surfing in New Zealand Celebrations are to be held in New Brighton... more
25 Feb 2015 Property
Auckland inner-city height restrictions weighing on supply, RBNZ's Wheeler says Feb. 25 (BusinessDesk) - New Zealand's government... more
11 Feb 2015 Property
Article - BusinessDesk Feb. 11 (BusinessDesk) - New Zealand residential property sales rose in January from the same month last... more
30 Jan 2015 Migration
NZ migration surged to record in 2014, helped by robust economy Jan. 30 (BusinessDesk) - New Zealand migration surged to a... more
25 Feb 2015 Travel & Tourism
By Fiona Rotherham Feb. 25 (BusinessDesk) - The only cloud on Air New Zealand’s horizon in coming months will be yield ... more
25 Feb 2015 Sailing
Yachting New Zealand has named 15 campaigns in the 2015 NZL Sailing Team. All are chasing the ultimate goal of Olympic glory in... more
25 Feb 2015 Opinion
Gordon Campbell on whether New Zealand troops are the least of Islamic State’s problems Given that it has been ... more
24 Feb 2015 Opinion
Gordon Campbell on the drip-feeding of information about the Iraq deployment There are two ways of framing the story of our... more
20 Feb 2015 Appointments
Foreign Minister Murray McCully has named diplomat Billie Moore as New Zealand’s new Consul-General in Sydney. "Ms Moore will... more
19 Feb 2015 Recruitment
Tertiary Education, Skills and Employment Minister Steven Joyce says better-than-expected Better Public Services results mean the ... more
4 Feb 2015 Recruitment
The latest labour market data shows continuing strong employment growth with 80,000 more jobs added to the New Zealand economy in ... more