Wellington, Sep 8 (DPA) New Zealand’s recession may be over, but the country’s strong currency which has recently surged to a 12 month high against the US dollar was at odds with its low growth outlook and interest rates, Finance Minister Bill English said Tuesday.
The New Zealand dollar, which gained 12 percent on the US dollar in the past three months, and traded at 69.36 US cents Tuesday, appeared to be “out of line with New Zealand’s fundamentals”, English told Radio New Zealand.
“It will be interesting to see what happens over the next six months or so as Australia starts to raise their interest rates because their economy is growing and New Zealand interest rates stay flat,” he said.
“We can’t influence it directly but the fact that it is high means that we need to concentrate urgently on the competitiveness of our exporters so they can be competitive and can provide jobs even when the dollar is high.”
He warned “there is not going to be some strong wave of export growth” for the country’s exporters to ride on.
The comments came after a report by New Zealand’s Treasury that the country may have come out of its recession, according the latest monthly economic indicators released Monday.
The department said that New Zealand would benefit from an improved global economic outlook, while the nation’s higher net migration and increasing business and consumer confidence meant its recovery would be stronger than others.
The Treasury said such “signs of renewed growth” would likely result in a lower peak in the unemployment rate, probably to around 7.5 percent next year, compared with a peak of 8 percent in earlier forecasts.
Migration during July added 2,500 people to New Zealand’s population. This took net migration for the 12 months through July 2009 to 14,500, up from 5,200 a year earlier.
The Treasury pointed to the national bank’s business outlook survey in August, which showed another surge in reported consumer confidence, with 34 percent of respondents expecting better economic conditions over the next 12 months, up 16 percentage points from July.
There were slight increases in monthly retail sales and in house prices.
New Zealand’s Reserve Bank is expected to review the official cash rate Thursday, with most economists expecting the bank to leave the official cash rate unchanged at 2.5 percent.
