NZ dollar should be 15% lower to cut current account: IMF 8 Jun 2012
- MARKET CLOSE: NZ stocks mixed; A2 gains on China licence Business
- NZ dollar slips before US CPI as OCR review looms Business
- RBNZ sees review of bank, non-bank regs complete by Sept 15 Business
- Oceania Living mulls listing in midst of rest home boom Business
- Electricity Authority seeks protection for small retailers Business
- Labour makes desperate sop to the regions News
- UPDATE: A2 Milk shares rise from 15-mth low on China licence Business
- Regulator's draft view trims returns for network monopolies Business
- A2 Milk secures Chinese licence, Synlait still waiting Business
- Moa boosts first quarter sales, expects higher margins 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.
18 Jul 2014 News
The Government today announced a $70,000 Community Conservation Partnership Fund grant for the Rimutaka Forest Park Trust to ensure... more
22 Jul 2014 Business News
Article - BusinessDesk Moa boosts first quarter sales, expects higher margins to drive profits By Tina Morrison July 22 ... more
21 Jul 2014 Business News
A single unique number for every business and a range of new services that reduce the need for businesses to provide the same ... more
22 Jul 2014 Entertainment
Playing at this year’s New Zealand International Film Festival, Cap Bocage is a close-up exploration of the forces that came... more
22 Jul 2014 Lifestyle
The stars of this year’s most anticipated comedy, The Inbetweeners 2 will head to New Zealand next month as part of the... more
14 Jul 2014 Property
July 14 (BusinessDesk) - New Zealand house sales fell in June from a year earlier, led by properties of $400,000 or less, indicating... more
11 Jul 2014 Migration
If you’re in the UK on a Tier 1 (General) visa, you’ll need to apply for an extension as soon as possible. The deadline... more
17 Jul 2014 Travel & Tourism
Associate Tourism Minister Todd McClay has congratulated Tourism New Zealand on winning the Pacific Asia Travel Association’s... more
22 Jul 2014 Netball
EasiYo Tactix are delighted to announce the signing of experienced defender Demelza Fellowes (formerly McCloud) and versatile... more
22 Jul 2014 Opinion
The refusal by Prime Minister John Key to issue a personal apology to Tania Billingsley has been accompanied by an array of... more
18 Jul 2014 Opinion
So one hand of the state – the Independent Police Conduct Authority - has now washed the hands of its brother agencies, and... more
8 Jul 2014 Appointments
New Zealand Government Minister announces ACC Board appointments ACC Minister Judith Collins today announced the appointment of ... more
14 Jul 2014 Recruitment
New Zealand Government Hon Steven Joyce Minister for Tertiary Education, Skills and Employment Hon Hekia Parata Minister of... more