Economic Week
June 23, 2017
by Nick Clark
The Reserve Bank this week left the
Official Cash Rate unchanged at 1.75 percent and signalled it will likely remain low for some time to come.
In his statement Reserve Bank Graeme Wheeler noted that global economic growth has increased and become more broad-based but there are still challenges and uncertainties. Global inflation is also picking up but remains low and it expects monetary policy to remain stimulatory in the advanced economies, although less so going forward.
The NZ Dollar has appreciated in recent weeks, in part due to higher export prices, and the Reserve Bank restated its wish for a lower NZ Dollar to help rebalance growth in favour of the tradables sector.
Although March quarter GDP growth was weaker than expected, the Reserve Bank believes the growth outlook ‘remains positive’ and it observed that changes in Budget 2017 should be supportive of growth.
The Reserve Bank believes higher inflation recorded in the March quarter was influenced by temporary factors such as volatility in fuel and food prices. In the short-term it believes headline could bounce around a little before settling at around 2 percent, the mid-point of its target range.
Overall, the Reserve Bank concluded that “monetary policy will remain accommodative for a considerable period”. Barring uncertainties, the OCR is likely to remain on hold deep into 2018.
Dairy prices slipped at this week’s
Global Dairy Trade auction, the first decline since March.
Overall, the GDT Price Index slipped 0.8 percent. Whole milk powder dropped 3.3 percent while other commodities had mixed fortunes. There were raises for skim milk powder (up 1.4 percent), butter (up 2.9 percent) and anhydrous milk fat (up 4.4 percent) and falls for lactose (down 11.1 percent), rennet casein (down 8.0 percent), and cheddar (down 3.8 percent). The average winning price was $US 3,434 and 21,171 tonnes were sold.
This week’s decline broke a run of six consecutive increases over which time the GDT Price Index rose 13.7 percent. Prices are at about the same level as they were last December but they are 57.5 percent higher than they were this time last year.
The rural real estate market remains steady, according to the Real Estate Institute of NZ’s latest
Rural Statistics. There were 514 farm sales in the three months to May, up 5.1 percent on the same period last year, while for the full year to May 2017 there were 1,790 farm sales, up.1 4 percent on the year to May 2016.
The median price per hectare for the three months ended May was $27,212, up 2.0 percent on the same period last year. The REINZ Price Index, regarded as a more accurate reflection of prices, was also up 4.6 percent compared to the same period last year. However, prices were down for both metrics compared to the three months ended April.
Immigration continues to run hot with annual net migration of 72,000 in the May 2017 year, according to Statistics NZ’s monthly
International Travel and Migration Statistics. Migrant arrivals numbered 130,400 and migrant departures numbered 58,400 in the year ended May 2017. On a net basis, New Zealand citizens leaving and returning to the country almost balanced each other out in the last 12 months – highly unusual.
Tourism also continued its record breaking run, with visitor arrivals up 10 percent from the May 2016 year, to a new annual record high of just over 3.6 million in the 12 months ending May 2017.
Exchange Rates
| NZ Dollar |
This Week
(22/6/17) |
Last Week
(15/6/17) |
Last Month
(22/5/17) |
Last Year
(22/6/16) |
| US Dollar |
0.7246 |
0.7233 |
0.6930 |
0.7133 |
| Australian Dollar |
0.9606 |
0.9492 |
0.9314 |
0.9571 |
| Euro |
0.6491 |
0.6446 |
0.6192 |
0.6342 |
| UK Pound |
0.5722 |
0.5673 |
0.5334 |
0.4860 |
| Japanese Yen |
80.52 |
79.27 |
77.27 |
74.55 |
| Chinese Renmimbi |
4.9506 |
4.9133 |
4.7742 |
4.6980 |
| Trade Weighted Index |
78.39 |
77.73 |
75.17 |
75.89 |
Source: Reserve Bank of NZ
Wholesale Interest Rates
| |
This Week
(22/6/17) |
Last Week
(15/6/17) |
Last Month
(22/5/17) |
Last Year
(22/6/16) |
| OCR |
1.75% |
1.75% |
1.75% |
2.25% |
| 90 Day Bank Bill |
1.96% |
1.93% |
1.97% |
2.35% |
| 10 Year Government Bond |
2.77% |
2.72% |
2.85% |
2.56% |
Source: Reserve Bank of NZ