NZ dollar should be 15% lower to cut current account: IMF 8 Jun 2012
- Offshore iron ore mining worth $150M a year, miner says Business
- NZ manufacturing sales volumes rise 5.7% Business
- NZ Dollar Outlook: Kiwi may gain as interest rate hikes loom Business
- Fulton Hogan more than doubles 1H pretax profit Business
- AsureQuality taps Hansells John McKay as CEO Business
- Wellington Drive seeks $5M from shareholders in note offer Business
- NZ dollar falls after better than expected US jobs data Business
- NZ Reserve Bank set to begin tightening cycle Business
- World Week Ahead: Dark clouds over China Business
- MARKET CLOSE: NZX 50 extends gain 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.
7 Mar 2014 News
A leading health organisation devoted to improving the health of Pasifika peoples has been selected to establish a Whanau Ora ... more
7 Mar 2014 News
New Zealand Government Hon Peter DunneMinister of Internal Affairs 6 March 2014 Lottery Grants Board allocates $28 million to ... more
6 Mar 2014 Business News
Fletcher Building CEO and managing director Mark Adamson has been appointed New Zealand’s representative on the Australian B20... more
6 Mar 2014 Business News
Auckland home sales fall 15% in February as listings reach year-high, Barfoot saysAuckland residential property sales fell... more
5 Mar 2014 Lifestyle
Red Bull Music Academy Wellington singer Louis Baker to play at the Red Bull Music Academy SonarDôme stage at the... more
5 Mar 2014 Lifestyle
New Zealand born actor David de Lautour has been cast to play iconic All Black Stephen Donald in the upcoming TV ONE drama The Kick,... more
19 Feb 2014 Property
Housing Minister Dr Nick Smith today announced the start of a trial Warrant of Fitness scheme on Housing New Zealand... more
14 Feb 2014 Property
Feb. 14 (BusinessDesk) – New Zealand property sales fell 4.3 percent in January from a year earlier while the median price... more
27 Feb 2014 Migration
Article - BusinessDesk NZ net migration climbs to decade-high in January with more arrivals, fewer departures Feb. 27 ... more
4 Mar 2014 NZ Tourism
Transport Minister Gerry Brownlee has announced a staged 20 per cent decrease in the airline passenger security charges for domestic... more
7 Mar 2014 Sport
Russian President Interview to Russian and foreign media ahead of the Paralympic Games March 6, 2014, 00:05 QUESTION: The London... more
7 Mar 2014 Column
Genesis share offer coming soon In the next few weeks, New Zealanders will have the opportunity to invest in a minority stake... more
6 Mar 2014 Opinion
The Cabinet manual not only forbids actual conflicts of interest when Ministers are performing public duties from which they or... more
20 Feb 2014 People
Feb. 20 (BusinessDesk) – The oil and gas industry has lost its chief lobbyist, David Robinson, who is leaving to become the... more
13 Feb 2014 People
Mediaworks Nicole Jones has been with MediaWorks TV for 13 years, most recentl... more
25 Feb 2014 Recruitment
Tertiary Education, Skills and Employment Minister Steven Joyce today released the free Occupation Outlook 2014 mobile app that... more