NZ dollar should be 15% lower to cut current account: IMF 8 Jun 2012
- NZ dollar falls against stronger greenback Business
- Foley Family Wines profit jumps on bumper 2016 harvest Business
- Landcorp books $9.4 million loss in FY16 Business
- MARKET CLOSE: NZ shares rise Business
- NZ dollar pares gains to be little changed Business
- Mad Butcher owner Veritas in talks with bank Business
- European Commission recognises NZ auditor regulations Business
- NZOG to offer 40M share buyback Business
- NZOG to offer 40M share buyback Business
- Sharemilkers most likely to face 'undue pressure' from banks 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 Aug 2016 News
New Zealand Government Hon Gerry BrownleeMinister of Defence 25 August 2016 Minister welcomes Baghdad appointment Defence Minister... more
29 Aug 2016 Business News
Article - BusinessDesk Monday 29 August 2016 03:47 PM Auckland Council debt rises 4.1% to $7.6 billion on infrastructure spending By... more
24 Aug 2016 Business News
Article - BusinessDesk NZ trade deficit narrows in July from year earlier as imports fall faster than exports By Jonathan ... more
18 Jul 2016 Lifestyle
The Outlook for Someday Young New Zealanders Making Films For Good What does sustainability mean to you? Since 2007 The Outlook for... more
3 Aug 2016 Property
Wednesday 03 August 2016 10:30 AM Auckland house prices are stabilising, may have plateaued, Barfoot says Aug. 3 (BusinessDesk) -... more
2 Aug 2016 Property
Article - BusinessDesk NZ home values rise at fastest quarterly pace in 12 years By Tina Morrison Aug. 2 (BusinessDesk) - New... more
30 Mar 2016 Migration
British High Commissioner Jonathan Sinclair is defending changes to skilled migrant rules for Britain but suggests they won't affect... more
25 Aug 2016 Travel & Tourism
New Zealand Government Hon Wagner using the new eGates at Wellington Airport.... more
10 Aug 2016 Travel & Tourism
Article - BusinessDesk Wednesday 10 August 2016 12:19 PM Aug. 10 (BusinessDesk) - New Zealand accommodation providers had their... more
25 Aug 2016 Motor Sport
25 Aug 2016 Opinion
Column - Gordon Campbell Gordon Campbell on the end game in Spain First published on Werewolf more
11 Aug 2016 Opinion
Column - Gordon Campbell Gordon Campbell on the Impotence of the Reserve Bank First published on Werewolf more
29 Aug 2016 Appointments
New Zealand Government Hon Jo Goodhew Minister for Food Safety 29 August 2016 Jane Lancaster has been appointed to the Food ... more
12 Aug 2016 Appointments
New Zealand Government Hon Hekia ParataMinister of Education 12 August 2016 Appointments to New Zealand National Commission for... more
3 Aug 2016 Recruitment
New Zealand Government Hon Steven Joyce Minister for Tertiary Education, Skills and Employment 3 August 2016 Jobs growth continues... more
3 Aug 2016 State of the Market Report
Wednesday 03 August 2016 11:57 AM NZ private sector wage inflation misses expectations in June quarter Aug. 3 (BusinessDesk) - New... more