IMF positive on NZ

June 11th, 2014 at 1:00 pm by David Farrar

The Herald reports:

The International Monetary Fund expects the New Zealand economy to grow 3.5 per cent this year before easing back to a 2.5 per cent pace by 2016, in line with its average since the start of the century.

The economic expansion is becoming increasingly embedded and broad-based, it says, driven by supportive financial conditions, high commodity prices, resurgent construction activity and a substantial increase in net immigration.

The supports moves by the Reserve Bank to tighten monetary policy and by the Government to return to a fiscal surplus.

But though it sees New Zealand banks as well capitalised and sound, it points to their reliance on offshore borrowing as a continuing source of risk over the medium term.

An orderly exit from the quantitative easing undertaken by larger advanced economies would likely benefit New Zealand by bringing the exchange rate down.

Our high exchange rate is more because of the weakness of other economies, and their decisions to print money.

Tags:

18 Responses to “IMF positive on NZ”

  1. Tarquin North (303 comments) says:

    Don’t mention printing money – Russel will think it’s an endorsement.

    Vote: Thumb up 8 Thumb down 0 You need to be logged in to vote
  2. Sir Cullen's Sidekick (890 comments) says:

    Just when every planet is aligned in NZ’s favour, cometh the Labour/Green/Mana-DotCon/Maori/NZ First monster…..

    Vote: Thumb up 13 Thumb down 0 You need to be logged in to vote
  3. tamati (75 comments) says:

    We really shouldn’t be satisfied with 2.5% long term growth. Over the past century New Zealand has been in a slow and steady relative decline. An average growth of 3.5%-4.0% should be what we should aim for.

    Vote: Thumb up 7 Thumb down 1 You need to be logged in to vote
  4. smttc (752 comments) says:

    tamati, not according to RB Governor Graeme Wheeler who says sustainable growth for NZ is 2.5%pa.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. RRM (9,932 comments) says:

    IMF positive – sounds like a job for the VD clinic? :-)

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  6. georgebolwing (869 comments) says:

    tamati:

    Why stop at 3.5%-4.0%? Let’s go for 13%!

    In developed economies, 2.5% average long-term, real growth is pretty amazing. It would see real GDP double every 28 years.

    Vote: Thumb up 2 Thumb down 0 You need to be logged in to vote
  7. georgebolwing (869 comments) says:

    Also, New Zealand has not been in slow and steady relative decline over the past century. The OECD data (which doesn’t go back 100 years), shows that real GDP per capitia in New Zealand compared to the OECD average declined in the period from about 1960 to 1990, and has been pretty stable since then.

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  8. tamati (75 comments) says:

    George:

    The fact is we are already behind most developed countries, we need to grow faster if we want to close the gap. If both NZ and Australia’s real GDP was to double, the gap between per-capita GDP would also double.

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  9. Dead Earnest (160 comments) says:

    4 -5% growth would be sustainable with a target of 60,000 plus quality immigrants per year. You would just need to open up more land for housing.

    Vote: Thumb up 3 Thumb down 3 You need to be logged in to vote
  10. Bob (497 comments) says:

    After reading that what person in his right mind would vote Labour and it’s ragtag hangers on this election. More than ever we need a good competent government not one which would probably drive us backwards.

    Vote: Thumb up 5 Thumb down 0 You need to be logged in to vote
  11. kiwitory (4 comments) says:

    It does concern me that same IMF report points to a housing bubble; this should be food for thought for Mr Cunnliffe.
    His policy may increase supply that would cause the bubble to burst; something that should be avoided.
    Many of my friends in Auckland are enjoying considerable capital growth on their properties, why endanger this?
    Surely the more the property is worth the better the countries books are in; elementary school boy accounting.

    Vote: Thumb up 1 Thumb down 0 You need to be logged in to vote
  12. Fisiani (1,039 comments) says:

    I met a person who said he had “half a mind to vote Green”. I told him that was all the brain he needed to make such a thought. People with a whole mind never vote Green as they can see though the environmental claptrap and detect the underlying Marxism.
    New Zealand is on the edge of sustained prosperity if we keep on the current course. The pace of reform is painfully slow and incremental.
    If only National took on the teachers unions and started sacking those teachers who refused to follow orders.

    Vote: Thumb up 4 Thumb down 0 You need to be logged in to vote
  13. hj (7,031 comments) says:

    So the earthquake has been a godsend as is immigration as it stimulates a people serving sector (construction firms have grown by 10,000 since 2002)?

    The Savings Working Group say immigration hasn’t improved incomes (in fact) it had increased the deficit; it appears to have had exactly the opposite effect to what it was meant to?

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  14. hj (7,031 comments) says:

    6.
    Housing sector risks.
    By historical and international comparisons and some measures of
    affordability New Zealand’s house prices appear elevated
    (text figure). This in part reflects a limited housing stock from low housing investment in recent years and geographical constraints preventing a rapid housing supply response.
    2
    With house price inflation running high, there remains the risk
    that expectations-driven, self-reinforcing demand
    dynamics and price overshooting could take hold.
    The government’s steps to help alleviate supply
    bottlenecks, measures to tighten standards for
    mortgage lending (paragraph 11), and an increase
    in mortgage rates should help ease price
    pressures. But a sudden price correction—possibly
    triggered by a shock to household incomes or
    borrowing costs—could reduce consumer
    confidence, impact overall economic activity,
    and hurt banks’ balance sheets.
    7.
    Tail risks and downside scenarios.
    Many of the above risks are closely linked—for
    example a sharp slowdown in China could
    weaken growth prospects in Australia,
    triggering a broad-based fall in demand for
    New Zealand’s exports, and lead to a sudden
    decline in house, farm and commercial real
    estate prices. This in turn could weaken
    consumer demand and negatively affect banks’
    balance sheets and their willingness to lend. The
    downside macroeconomic impact in a scenario wher
    e shocks compound each other, while difficult
    to model, could be large.

    Vote: Thumb up 0 Thumb down 2 You need to be logged in to vote
  15. hj (7,031 comments) says:

    Australian Productivity Commision.

    THE case for higher immigration as a driver for economic growth is far from proven, as is the notion that more immigrants can counter the negative effects of population ageing, the Productivity Commission says.

    In an analysis of the “big Australia” debate in its 2011 annual report published yesterday, the commission said the economic impact of immigration “is sometimes clouded by misperception”.

    “Two benefits that are sometimes attributed to immigration, despite mixed or poor evidence to support them, are that immigration is an important driver of per capita economic growth, (and) immigration could alleviate the problem of population ageing,” it says.

    The commission also notes immigration doesn’t affect household wages overall, though particular sectors could be adversely affected if there were a large influx of skilled immigrants.

    And it warns that trying to slow the impact of an ageing population on the economy by bringing in young workers is only a sugar hit.

    http://www.theaustralian.com.au/national-affairs/policy/immigration-link-to-economic-growth-yet-to-be-proven-says-productivity-commission/story-fn9hm1gu-1226179973978
    Fore warned(?) our own power elite agreed that the terms of enquiry:

    are relatively uncontroversial given the desire to establish broad political support for the Commission

    http://www.treasury.govt.nz/publications/informationreleases/productivitycommission/pdfs/t2011-2000.pdf

    Vote: Thumb up 0 Thumb down 1 You need to be logged in to vote
  16. tvb (4,430 comments) says:

    This is probably the best ever report we have had from the IMF and is a glowing tribute to John Key and Bill English and if anyone is flirting with there idea of the Labour Party and its allies they should read it and say no way am I going to risk that.

    Vote: Thumb up 1 Thumb down 1 You need to be logged in to vote
  17. hj (7,031 comments) says:

    When

    Peter Sutherland, Chairman of the London School of Economics, non-executive Chairman of Goldman Sachs International, and Special Representative of the UN Secretary-General for International Migration and Development, is former Director General of the World Trade Organization, EU Commissioner for Competition, and Attorney General of Ireland.

    speaks, people listen!

    But even more ambitious action is needed. When they gather at the UN in October, policymakers should take courage from the reform trailblazers in the US, Germany, the UAE, and elsewhere. If profound change is possible at the national level in the face of toxic populism, it should come more easily at the international level, where cooperation produces mostly winners. (The losers generally are bad actors: smugglers, traffickers, abusive recruiters, and exploitative employers.)
    States need not agree on all aspects of migration in order to settle on an agenda for common action. There is no shortage of problems to confront and opportunities to seize. We need to rein in the bad actors; eliminate discrimination against migrants; sharply reduce human trafficking; increase the share of migrants working at their highest skill level; decriminalize migration violations; end the detention of migrant children; recast refugees as productive members of our communities; and lower the proportion of migrants lacking residency rights.

    Some advocates of open borders estimate that unrestricted movement across borders could double global GDP. While a borderless world is a political non-starter, that figure does point to the scale of the development gains that a truly well-managed system of global mobility might produce.

    http://www.project-syndicate.org/columnist/peter-sutherland#YgxuvmX7yoDLDAED.99

    What’s good for the economy isn’t necessarily good for the individual in that economy.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. hj (7,031 comments) says:

    tvb (4,081 comments) says:
    This is probably the best ever report we have had from the IMF and is a glowing tribute to John Key and Bill English and if anyone is flirting with there idea of the Labour Party and its allies they should read it and say no way am I going to risk that.
    …….
    So where are the new industries outside of commodities and building houses and infrastructure for new arrivals. Where are the productivity gains per worker?
    It takes 3 to 4 years of income to build the infrastructure necessary for each new arrival before capital to output levels are maintained – paid for through the taxes of a low wage economy or borrowed offshore. [Michael Reddell - Reserve Bank]
    Where does it say houses will become more affordable?

    If we had open borders our GDP would go up; the IMF would give us a big tick. They don’t look beneath the surface.
    The Savings Working Group looked beneath the surface but the government ignored them.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote