New Zealand: Export-led shift
The economy has slowed over the course of the year, serving to eliminate excess demand pressures. The projected pick-up in the pace of activity is likely to be modest, as the shift towards export-led growth is hampered by the exchange rate appreciation since the middle of the year. Nevertheless, moderate real disposable income growth will allow private consumption to gently accelerate. Employment is projected to stabilise, but the rise in the unemployment rate will be attenuated by some labour market withdrawal.
The emerging negative output gap and dissipating inflationary pressures would allow room for significant monetary policy easing next year, which could also induce a currency depreciation and thereby reduce the external imbalance over time. But additional fiscal stimulus, whether in the form of tax cuts or additional spending, would reduce the room for lower interest rates and inhibit the transition to export-led growth. This would make the challenges of macroeconomic stabilisation more difficult at a time when the outlook is subject to considerable risks.
|Population (000s), 2005||4 099|
|Area (000 sq km)||269|
|GDP (Billion USD), 2005||104.5|
|Life expectancy at birth (Women, Men), 2004 ||81.3, 77.0|
|Total labour force (000s), 2005||2 161|
|Government type||Parliamentary Democracy|
|Indicators||% change unless otherwise indicated|
|Consumer price index||3.6||2.8||2.0|
|Unemployment rate (%)||3.8||4.4||4.6|
|General government financial balance|
|Current account balance (% GDP)||-9.3||-8.4||-8.3|
No. 258/259, December 2006