•  
  • New York 04:12
  • London 08:12
  • Barcelona 09:12
  • Tokyo 17:12
  • Sydney 19:12

  • SignUp | Login

Weekly Commentary

The other ‘R' word

Mon, Jul 20 2009, 06:01 GMT
by Westpac Institutional Bank Team

Westpac Institutional Bank  |  View company's profile


Vote:

0

0

Last week saw an increased focus among officials on the prospects for recovery in New Zealand, and the accompanying risks.

In a speech on Tuesday, RBNZ Governor Bollard said there are early signs that the global economy is starting to recover, and noted that New Zealand could recover more rapidly than many of our major trading partners. As detailed in our latest quarterly Economic Overview, also published last week, we share this assessment. The prospects of a more rapid exit from recession in New Zealand reflect the fact that the initial drivers of the recovery are likely to be home-grown – in particular, surging population growth and residential construction.

However, Dr Bollard noted that the recovery could displace another important factor for the economy: rebalancing. The recession has seen a dramatic slowing in the rate of growth of household debt, and an increase in precautionary saving.
But the RBNZ sees a risk that as the economy recovers, households could return to their previous borrowing and spending patterns, perhaps spurred on by rising house prices. While this isn’t a new concern – it was proposed as an ‘alternative’ scenario in the June Monetary Policy Statement – the amount of attention it has garnered in recent weeks suggests that the ‘alternative’ is becoming more of a ‘central’ view.

These concerns about a return to unbalanced growth were echoed to varying degrees last week by Prime Minister Key, Finance Minister English, and – less encouragingly – by ratings agency Fitch, who surprised the market by placing New Zealand’s long-term credit rating of AA+ on negative outlook. Fitch’s assessment went a step further, noting the risk that overseas investors could demand higher returns in order to keep lending to New Zealand, leaving the country in a trap of high interest costs and low growth potential.

Published on  Mon, Jul 20 2009, 06:04 GMT


Westpac Institutional Bank http://www.westpac.co.nz | natalie_denne@westpac.co.nz

Archive


Legal disclaimer and risk disclosure

No disclaimer available
Vote:

0

0


Interested in forex trading? forex brokerage firms!


ACM Advanced Currency Markets SA
Contact the broker/FDM
Open a demo account
MG Financial Group
Contact the broker/FDM
Open a demo account
Alpari (UK) Limited
Contact the broker/FDM
Open a demo account		CitiFX Pro
Contact the broker/FDM
Open a demo account		IG Markets
Contact the broker/FDM
Open a demo account

GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

©2010 "FXstreet.com. The Forex Market" All Rights Reserved.