Country Report New Zealand October 2009

Outlook for 2010-11

• The government, led by John Key of the centre-right National Party, enjoys strong public support and a large parliamentary majority by New Zealand's standards, putting it in a good position to push through its agenda.
• The Economist Intelligence Unit expects government debt to balloon to the equivalent of 38% of GDP by 2011; the fiscal deficit will narrow to 5.2% of GDP in 2010 and 2.5% in 2011, from an estimated 6.3% in 2009.
• Real GDP is forecast to grow by 1.9% in 2010, before expanding by 2.3% in? 2011.
• Inflation is comfortably within the 1-3% medium-term target range set by the Reserve Bank of New Zealand (RBNZ, the central bank). Prices are forecast to rise by an average of 1.5% in 2010 and 2.2% in 2011.
• The New Zealand dollar will remain very vulnerable to changes in investor risk appetite. We expect the local currency to average NZ$1.48:US$1 in 2010 and NZ$1.50:US$1 in 2011.
• The current-account deficit is forecast to widen to the equivalent of 4% of GDP in 2010 and 4.7% in 2011 as the income deficit widens.

Monthly review

• The government has unveiled its National Land Transport Programme (NLTP), to which NZ$8.7bn (US$5.2bn) has been allocated over three years. The NLTP will target projects that will boost economic growth and productivity.
• Amendments to streamline the Resource Management Act were passed by parliament in September.
• The government is likely to face strong opposition to its plans to explore the mineral resources that are believed to exist in various national parks. Around 70% of New Zealand's potential mineral stock is found in conservation areas.
• The government has extended its retail bank deposit-guarantee scheme, which will now expire at the end of 2011, instead of on October 1st 2010.
• The RBNZ left the official cash rate (the main policy rate) unchanged at an all-time low of 2.5% after its latest monetary policy review on September 10th.
• According to a commercial bank, the National Bank of New Zealand, the number of firms expecting an improvement in their businesses in the next 12 months rose to a net 26%, the highest figure in almost five years.
• The nominal value of retail sales rose by a seasonally adjusted 1.1% quarter on quarter in the second quarter of 2009, up from a fall of 1.4% in the first quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48
NAICS Code: 517