Retail sales rose more strongly than expected in August. This could point to a more vigorous recovery than previously suspected.
But the Govt is taking the latest reading cautiously. It sees the pick-up at retail level as partly due to stimulus from April’s income tax cuts. On the other side of the ledger the high dollar, the bane of exporters, has kept the price of imported goods lower than they might have been. Some calculations suggest the exchange rate effect has lifted purchasing power by as much as 20%.

Finance Minister Bill English who returned at the weekend from London, reports Aust and NZ are “flavour of the month” with overseas investment markets which see the two countries coming out of the recession in better shape than others in the OECD. Aust and NZ did not have a banking crisis, public finances are under control and both are benefiting from the Chinese slipstream. In this climate NZ should have no trouble raising debt, (it needs to borrow $250m a week over the next 3 to 4 years), but the cost of financing the debt will be around $700m a year and add significantly to the fiscal strains of the next decade. Having worked itself out of the last debt cycle over 30 years NZ now faces another debt cycle which may be just as long. Getting out of it won’t be helped by the public perception the Govt is throwing tax-payer’s money away on the free-to-air broadcast rights for the Rugby World Cup.

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