Economic Week, February 2

by Nick Clark, Manager General Policy

 

Budget Day and Budget Policy Statement

The Minister of Finance announced this week that Budget 2018 will be delivered on Thursday 17 May.  Meanwhile, Federated Farmers’ submission on the Budget Policy Statement was considered by Parliament’s Finance & Expenditure Committee.
In our submission we recommended that the Government takes a prudent approach that delivers value for money and reduces the risk of unintended consequences or wasteful spending; that the Budget Responsibility Rules are adhered to and do not enable overly loose fiscal policy; and that budget allowances are not revised upwards in Budget 2018 or in subsequent budgets.  To read the full submission see here.

 Boomer Exports in December

Goods exports leapt $1.1 billion in December 2017 compared to December 2016, according to Statistics NZ’s monthly Merchandise Trade Statistics.  At $5.6 billion exports hit a new monthly high.
Most commodities experienced increases, but dairy and meat led the charge.  Milk powder, butter and cheese was up $445 million (30.3%) to $1.9 billion and meat and edible offal was up $229 million (46.6%) to $721 million.  Wool was also up $11 million (21.9%) to $63 million.
Imports were also up $494 million to $4.9 billion, resulting in a monthly trade surplus of $640 million.  This was the largest ever December monthly surplus and the largest monthly surplus since March 2015’s $661 million surplus.
For the year ended December 2017, goods exports were $53.7 billion, up 10.7% on the year ended December 2016.  Good imports were $56.5 billion, up 9.4%.  The annual goods trade deficit narrowed to $2.8 billion.
Dairy exports were $14.0 billion, up $2.8 billion (25.1%) for the year.  Meat exports were $6.6 billion, up $706 million (11.9%).  Wool exports were $524 million, down $142 million (21.4%).
China is comfortably NZ’s biggest export market, with exports of $12.0 billion for the year (up 27.0%), followed by Australia with $8.8 billion (6.5%) and the United States with $5.3 billion (up 0.5%).

Agricultural Debt

Agricultural debt slipped $99 million (or 0.2%) in December 2017 compared to November 2017, according to the Reserve Bank’s monthly Sector Lending Statistics.   At $60.5 billion, agricultural debt was 2.2% higher than it was in December 2016.  This continued a relatively stable rate of annual growth of around 2-2.5% seen over recent months.
Annual growth in lending to other sectors remained significantly higher than for agriculture.  Housing lending was up 5.9% for the year, business lending was up 5.5%, personal consumer lending which was up 8.3%.  Growth in housing lending has steadily eased back this year from an annual rate of 9.3% last December, but growth in consumer lending has pushed up.

Next Week: OCR and Labour Market
Next week the Reserve Bank reviews the Official Cash Rate (expect no change to the current rate of 1.75%) and Stats NZ will be releasing its December quarter Labour Market Statistics.

Soil Moisture Data

The latest NIWA soil moisture data as at 1 February are available here . On 30 January the Minister of Agriculture announced that the medium-scale adverse event classification for the drought in parts of the country would be extended to the whole of Southland plus Otago’s Queenstown Lakes, Central Otago and Clutha districts.

Exchange Rates

NZ Dollar versus	This Week (1/2/18)	Last Week (25/1/18)	Last Month (29/12/17)	Last Year (1/2/17)
US Dollar	0.7368	0.7351	0.7097	0.7292
Australian Dollar	0.9150	0.9118	0.9096	0.9629
Euro	0.5932	0.5930	0.5942	0.6754
UK Pound	0.5187	0.5168	0.5278	0.5795
Japanese Yen	80.44	80.43	80.12	82.35
Chinese Renmimbi	4.6351	4.6956	4.6381	5.0151
Trade Weighted Index	75.10	75.17	74.32	79.64

Source: Reserve Bank of NZ

 

Wholesale Interest Rates

	This Week (1/2/18)	Last Week (25/1/18)	Last Month (29/12/17)	Last Year (1/2/17)
OCR	1.75%	1.75%	1.75%	1.75%
90 Day Bank Bill	1.89%	1.88%	1.88%	2.00%
10 Year Government Bond	2.90%	2.94%	2.75%	3.34%

Source: Reserve Bank of NZ