NZ economic situation The anatomy of a recovery for Achieving Results Together – Power of 3 August 2014 Dr Ganesh Nana Chief Economist @GaneshAhirao Power of 3 – August 2014 slide 1
Stock markets reach for the heavens NZX50 share price index 5400 Index 4400 Mumbai share prices 27000 BSE Sensex index Index 22000 3400 German share prices 10500 17000 DAX index Index 2400 Aug 06 Aug 08 Aug 10 Aug 12 Aug 14 8750 US stock prices 12000 17500 NZX Dow Jones Industrial Average Index Index 7000 7000 15000 01 Aug 06 01 Aug 08 01 Aug 10 01 Aug 12 01 Aug 14 BSE 5250 12500 3500 Aug 06 Aug 08 Aug 10 Aug 12 Aug 14 10000 DAX 7500 Aug 06 Aug 08 Aug 10 Aug 12 Aug 14 Dow Jones Power of 3 – August 2014 slide 2
But are we really out of the woods? Power of 3 – August 2014 slide 3
The good ... US employment 145 millions non-farm payrolls 140 135 130 125 Jul 06 Jul 08 Jul 10 Jul 12 Jul 14 Bureau of Labour Statistics Power of 3 – August 2014 slide 4
... the bad ... Unemployment in Europe % % of labour force 30 Greece Spain 20 Ireland Portugal 10 0 Jun 02 Jun 06 Jun 10 Jun 14 Eurostat Power of 3 – August 2014 slide 5
... and the ugly. 05 June 2014 When deciding to lower the key ECB interest rates at its meeting today, the Governing Council of the ECB took the decision to cut the interest rate on the deposit facility to -0.10%. Power of 3 – August 2014 slide 6
NZ’s attractiveness returns Net permanent migration annual totals 000s 50 25 0 -25 Jun 02 Jun 06 Jun 10 Jun 14 Statistics NZ Power of 3 – August 2014 slide 8
Or, more precisely, Oz attraction declines Flow of NZ citizens across the Tasman annual totals 50 departures to Australia 000s 40 arrivals from Australia 30 20 10 0 Jun 84 Jun 89 Jun 94 Jun 99 Jun 04 Jun 09 Jun 14 Statistics NZ Power of 3 – August 2014 slide 9
Strong employment growth dominated by CHC and AKL Employment change by region Jun 14 cf Jun 13 Canterbury Auckland Wellington Otago Mana-Wang Northland Nel-Marl & WC Gisb & HBay Bay of Plenty Taranaki Waikato 000s Southland -20 0 20 40 60 Statistics NZ Power of 3 – August 2014 slide 10
Sector growth remains imbalanced Tradable sector employment Non-tradable sector employment 900 1,700 actual number actual number 000s 000s 800 1,600 700 1,500 600 1,400 500 1,300 400 1,200 Jun 04 Jun 06 Jun 08 Jun 10 Jun 04 Jun 12 Jun 06 Jun 14 Jun 08 Jun 10 Jun 12 Jun 14 Statistics NZ; BERL calcs Statistics NZ; BERL calcs Power of 3 – August 2014 slide 11
Credit use shapes recovery Change in sector credit % Jun 2014 cf Jun 2008 30 25 20 15 10 5 0 -5 Agriculture Non-agric Consumer Housing business RBNZ Power of 3 – August 2014 slide 12
Business investment recovering Non-residential building consents 12-month total area 4.0 milion m 2 3.5 3.0 2.5 2.0 Jun 04 Jun 06 Jun 08 Jun 10 Jun 12 Jun 14 Statistics NZ Power of 3 – August 2014 slide 13
House building catch-up in progress New house consents 000s 12-month totals 16 Auckland Canterbury 12 rest of NZ 8 4 0 Jun 04 Jun 06 Jun 08 Jun 10 Jun 12 Jun 14 Statistics NZ Power of 3 – August 2014 slide 14
Rebalancing, at best, tentative Household debt 180 as % of nominal disposable income % 150 120 90 60 Mar 94 Mar 99 Mar 04 Mar 09 Mar 14 RBNZ Power of 3 – August 2014 slide 15
$Kiwi keeps inflation in check NZ$ TWI exchange rate Index monthly average 85 75 65 55 45 Jul 94 Jul 99 Jul 04 Jul 09 Jul 14 RBNZ Power of 3 – August 2014 slide 16
But tradeables looking shaky Merchandise export receipts 50 50 12-month totals $bn 40 40 excluding dairy 30 30 and forestry 20 20 Jun 05 Jun 05 Jun 08 Jun 08 Jun 11 Jun 11 Jun 14 Jun 14 Statistics NZ Power of 3 – August 2014 slide 17
Tourism receipts also struggling Tourism export revenues annualised totals 10 $bn 9 8 7 6 Mar 05 Mar 08 Mar 11 Mar 14 Statistics NZ; BERL Power of 3 – August 2014 slide 18
And the rebalancing continues ... Current account balance of BoP % of GDP as % of GDP 4 0 -4 -8 -12 -16 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002 2007 2012 2017 Power of 3 – August 2014 slide 19
Another dimension to the re-balancing consumer for today goods and services resources investment to or replace wealth for tomorrow investment to grow Power of 3 – August 2014 slide 20
Overall investment effort remains mediocre Non-hsg investment 20 as % of GDP % 18 16 14 12 10 Mar 88 Sep 94 Mar 01 Sep 07 Mar 14 Power of 3 – August 2014 slide 22
Despite opportunity of a generation New Zealand terms of trade index 1400 Index 2002=1000 World crop failures Korean War 1300 wool price boom 1967 wool price GFC shock 1st oil shock 1200 Great Depression 1100 2nd oil shock 1000 900 China & India East-Asia open up to financial trade and contagion Berlin wall 800 comes down WWII 700 1926 1931 1936 1941 1946 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016 Power of 3 – August 2014 slide 23
The world is changing
Keep it simple invest to maintain WEALTH invest to grow invest to endow
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