NZ Economy: Good News On The Financial Front- But Also A Warning
May 27th, 2010
The Govt had some good news to savour on the eve of the budget. First there was an indication the dairy payout in 2011 might rise as high as $8kg of milksolids. And the Reserve Bank reported the outlook for the financial system has improved over recent months, reflecting a recovery in the NZ economy driven by stronger trading partner activity and a sharp lift in the terms of trade. But RBNZ Governor Alan Bollard warned the global financial markets remain fragile, and “there is clearly a risk of further turbulence.”
As an external debtor country NZ could be vulnerable to any renewed deterioration in global debt markets. Bollard notes NZ households have increased their savings. Deputy Governor Grant Spencer says NZ banks remain in good shape and have the capacity to meet an increase in demand for credit. Spencer argues more bank lending will be important to sustain the economic recovery. A new prudential liquidity policy for banks became effective in April and “we expect to make further changes to the bank regulatory regime. The new non-bank regulatory regime should largely be in place by the end of the year.”
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Duncan Cotterill