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7
MAY 12

Traded sector the fix for financial outflows




Last month’s newsletter looked at New Zealand’s current account deficit and its implications. This month I would like to have a closer look at how the current account is structured.



The graph shows that the negative financial flows are not offset by the trade flows. The trade balance has hovered around zero over the long-term while financial outflows far...


tags: current account, exchange rate, trade, financial flows
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23
APR 12

Government needs theory of constraints training




Statistics New Zealand’s Business Operations Survey was released recently and one of the areas covered was the barriers to generating overseas income. Predictably the exchange rate was the biggest barrier for firms already exporting. In fact, if we look at the table below, the exchange rate is the first, second and third biggest barriers (low demand and increased competition offshore is...


tags: theory of constraints, exchange rate, export barriers
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11
APR 12

Government targeting the wrong deficit




The Government has been going to some lengths to ensure a Crown surplus in 2014/15 and this is an important policy objective. However, Government deficits are not the only New Zealand debt problem. Government influence beyond the Crown accounts need attention; more policy focus on a balanced current account is necessary.



As shown in the graph the current account has...


tags: current account, credit rating, government deficit
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26
MAR 12

Earning more and spending less




Last week marked the first major speeches since the election from the two biggest parties and there was the usual hype surrounding them. On the same day Statistics New Zealand’s productivity statistics were released showing a 0.1 percent drop in labour productivity. This managed to fly under the radar.

A couple of charts demonstrate the reasons for New Zealand’s poor productivity...


tags: productivity, exchange rate, current account, capital gains tax
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12
MAR 12

Briefings falling on deaf ears




Government agencies have weighed in on where the economy is going after the 2011 election and where the policy problems lie. There is a consensus between the Ministry of Economic Development and the Treasury that lagging international competitiveness is the problem, and in their own bureaucratic way, they have implored the Government for some changes.

The message is that the...


tags: treasury, ministry of economic development, exchange rate
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7
MAR 12

Swiss show the way




In the early northern autumn of 2011 the Swiss showed the way to protect international competiveness, the Guardian article sums up the situation back then:

http://www.guardian.co.uk/business/2011/sep/06/switzerland-pegs-swiss-franc-euro

Since the then Governor of the Swiss National...


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10
FEB 12

RBNZ needs a new strategy with its new Governor




Dr Alan Bollard has decided to resign from his role as Reserve Bank Governor in September leaving the Board of the bank to choose a replacement. Bollard has had a number of critics during his time as Governor (including me). The criticisms have centred on the slow pace of interest rate hikes in the mid 2000s which did not deal with domestic inflation and caused bigger problems down the...


tags: rbnz, alan bollard, policy targets agreement, ocr, exchange rate
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20
JAN 12

Accountability needed on poor economic performance




Over the past couple of years our apparent resilience to the financial crisis and optimistic forecasts of economic growth have been used to justify the Government’s status quo approach. Record high commodity prices have meant that primary industries have grown somewhat despite a high exchange rate decimating returns. In addition, consistently unrealistic economic forecasts from Treasury...


tags: traded sector, twi, loan to value ratios, monetary policy, innovation
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19
DEC 11

Escaping the debt trap




Numbers were a big issue leading up to the election. There was debate on the level of spending, net debt vs. gross debt and the time it will take a particular policy framework to deliver a surplus to the Government current account. Out turns of our national accounts depend on our ability to earn as much as our propensity, or otherwise, to spend.

Boosting earnings now needs more than...


tags: gross debt, public debt, monetary policy
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8
DEC 11

New Government needs to walk the talk on rebalancing




Policies to help the traded sector were one of the themes of the election campaign with a contrast in approach between the two major parties clearly evident. National argued that more of the same and reducing debt would be sufficient to ease the pressure on the exchange rate, while Labour promoted a more interventionist strategy through changes to the Reserve Bank Act and the introduction...


tags: exchange rate, reserve bank act, capital gains tax
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