Country Report New Zealand May 2009

Outlook for 2009-10

• The centre-right National Party has a strong popular mandate and a large parliamentary majority by New Zealand's standards, putting the new prime minister, John Key, in a good position to push through his agenda.
• The government's operating balance before asset gains and losses (OBEGAL) will slip into deficit in fiscal year 2008/09 (July-June) and will remain in the red throughout the forecast period.
• It is now unclear whether the government will follow through with planned additional tax cuts from April 2010.
• The Economist Intelligence Unit has revised its forecast for real GDP in 2009 to a contraction of 2.9%, from a fall of 3.2% previously.
• Consumer price inflation rose by 0.3% quarter on quarter in January-March, bringing year-on-year inflation down to 3%, from 3.4% in the previous quarter. Average consumer price inflation will slow to 1.4% in 2009 and 1.3% in 2010.
• We forecast that the New Zealand dollar will depreciate from NZ$1.42:US$1 in 2008 to NZ$2.03:US$1 in 2009 and NZ$2.19:US$1 in 2010.
• The current-account deficit will average 6.6% of GDP in 2009-10, but the merchandise trade deficit will narrow dramatically in the forecast period.

Monthly review

• The selection of the former prime minister, Helen Clark of the Labour Party, as the new head of the UN Development Programme has paved the way for the first by-election of the current political term.
• Concern is growing that a recent rise in long-term interest rates and a partial rebound in the value of the New Zealand dollar against the US currency could jeopardise the prospects for economic recovery.
• The government has announced its intention to amend legislation on holidays to allow businesses to offer staff a cash payment in lieu of their fourth week of annual leave.
• The recession continued into the fourth quarter of 2008, when real GDP (onan expenditure basis) contracted by a seasonally adjusted 0.6% quarter onquarter.
• The large current-account deficit narrowed to a seasonally adjusted NZ$3.8bn (US$2.2bn) in the fourth quarter of 2008, from NZ$4bn in the previous quarter.
• Inflationary pressures subsided further in the first quarter of 2009, as the impact of lower global oil prices continued to feed through to the transport sector and the recession resulted in greater slack in the economy.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;47;70
NAICS Code: 52;48;72