International securities regulations require that visitors read and acknowledge the disclaimer below before accessing information on this web site. Click Acknowledge and Hide Disclaimer below to hide the full disclaimer (requires JavaScript to be enabled).
Disclaimer - New Zealand Debt Management Office Web Site
- The information on this web site is issued by the New Zealand Debt Management Office (NZDMO) for informational purposes. It does not contain and is not an invitation or offer to buy or sell securities. Insofar as this web site refers to any offerings of securities, such offerings are directed to countries other than the United States and no offerings are made to persons accessing this web site within Australia.
- The NZDMO takes reasonable measures to ensure the quality of the data and other information produced by the NZDMO that is made available on this web site. However, the NZDMO makes no warranty, express or implied, nor assumes any legal liability or responsibility for the accuracy, correctness, completeness or use of any information that is available on or through this web site nor represents that its use would not infringe on privately owned rights. Further information contained on this web site is subject to change, completion or amendment without notice. Nothing contained on this web site is, or shall be relied on as a promise or representation by the New Zealand Government or the NZDMO as to the past or future. The contents of this web site should not be construed as legal, business or tax advice.
- This is a protected New Zealand Government web site. It is unlawful to intentionally cause damage to it or to any NZDMO electronic facility or data through the knowing transmission of any program, information, code, or command.
- The NZDMO systems to which this web site connects and related equipment are subject to monitoring. Information regarding users may be obtained and disclosed to authorised personnel, including law enforcement authorities, for official purposes. Access to or use of this web site constitutes consent to these terms.
- Reference to any specific commercial product, process, or service by trade name, trademark, manufacture, or otherwise does not constitute an endorsement, recommendation, or favouring by the New Zealand government or the NZDMO.
- For convenience and informational purposes only, the NZDMO server provides links to other web sites. These sites may contain information that is the copyright of third parties and subject to restrictions on reuse. Permission to use copyrighted materials must be obtained from the copyright owner and cannot be obtained from the NZDMO.
- The NZDMO is not responsible for the content of other web sites linked to or referenced from the NZDMO site. The NZDMO neither endorses the information, content, presentation, or accuracy of such web sites, nor makes any warranty, express or implied, regarding these external web sites.
- Each page on this web site must be read in conjunction with this disclaimer and any other disclaimer that forms part of it.
- By clicking on "Acknowledge and Hide Disclaimer" below, I confirm that I am either:
- resident outside of the European Economic Area; or
- person acting solely in my capacity as an authorised representative of an entity falling within one of the following descriptions:
- a legal entity authorised or regulated to operate in the financial markets, including: a credit institution, or investment firm, an other authorised or regulated financial institution, or insurance company, a collective investment scheme, a collective scheme management company, a pension fund, a pension fund management company, a commodity dealer, or an entity not so authorised or regulated but whose corporate purpose is solely to invest in securities;
- a national or regional government, a central bank, an international or supranational institution such as the International Monetary Fund, the European Central Bank, the European Investment Bank or other similar international organisations; or
- a legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts.
Disclaimer: The information on this web site is issued by the New Zealand Debt Management Office (NZDMO) for informational purposes. It does not contain and is not an invitation or offer to buy or sell securities. Each page on this web site must be read in conjunction with the disclaimer at http://www.nzdmo.govt.nz.
Summary
Introduction
New Zealand is a parliamentary democracy situated in the South Pacific. It has a population of around 4.3 million in a country similar in land area to Japan. New Zealand has a market economy with sizeable manufacturing and services sectors complementing a highly efficient export-oriented agricultural sector. New Zealand's high proportion of winter sunshine hours and considerable rainfall provide an ideal resource base for pastoral agriculture, forestry, horticulture and hydro-electricity generation. Hydro-electricity provides a relatively cheap source of energy and has allowed the development of energy-based industries such as aluminium refinement. New Zealand is also a popular overseas visitor destination and tourism is an important source of export income.
Economy
Over the last quarter of a century, the New Zealand economy has changed from being one of the most regulated in the Organisation for Economic Cooperation and Development (OECD) to one of the least regulated. The minority National Party government elected in November 2008 aims to continue developing New Zealand as a globally competitive economy while steering the nation through the current global downturn.
After weathering the twin “shocks” of the Asian economic downturn and consecutive summer droughts in 1997-98 and 1998-99, the New Zealand economy experienced its longest sustained period of growth in three decades during the years from 1999 to 2008. The years 2001 and 2002 saw good agricultural seasons, relatively high world prices for New Zealand's export commodities, a low exchange rate and a robust labour market. These factors boosted annual average GDP growth from 1.9% in June 2001 to 5.2% in December 2002.
Over the period 2002 to 2004, annual average growth in GDP was higher than the historical trend - in the range of 3.4% to 5.2%. This period of strong growth came about despite the economy experiencing several temporary negative events. These included travel disruptions and uncertainty due to the conflict in Iraq, the outbreak of Severe Acute Respiratory Syndrome (SARS) in Asia and the effects of dry weather on hydro-electricity production and farm output.
More recently, growth has eased as a result of high oil prices, interest-rate increases and slowing permanent and long-term immigration. Output in the economy was flat in the second half of 2005 but growth recovered slightly during 2006 helped by a rebound in domestic demand and dairy exports. The resurgence in growth driven by domestic demand and a high terms of trade continued throughout 2007 despite the Official Cash Rate (OCR) rising 100 basis points during this period. The economy contracted over the first three quarters of 2008 as high food and fuel prices, along with high interest rates, led to a sharp fall in domestic demand. A drought in the 2007-08 summer also reduced agricultural output, particularly dairy production, in the March 2008 quarter.
Growth is forecast to remain weak in the short term as households go through a period of debt consolidation. Annual average growth expected to be its weakest in the year ending March 2009. After this, an export-led recovery is expected to lead to growth increasing to trend levels of around 3% in 2011.
After a small rise in the short term, the annual current account deficit is expected to narrow over the medium term from its September 2008 level of 8.6% of GDP. Further declines in the exchange rate over 2009 and slowing import growth due to a relatively weak outlook for domestic demand are expected to contribute to this narrowing.
Annual Consumer Price Index (CPI) inflation increased from 1.8% in September 2007 to 5.1% in September 2008, well outside the Reserve Bank's inflation target band of between 1% and 3%, largely driven by higher petrol and food prices. Annual inflation then fell back to 3.4% in the December quarter, driven by falls in the price of fuel and other imports and a general easing in pricing pressures in the economy due to weaker domestic and external demand, partly as a result of the international financial crisis. Further falls are expected over 2009.
Response to International Credit Crisis
The government has introduced a number of measures designed to assist the economy through the international credit crisis and recession, including wholesale funding and retail deposit guarantees, measures to assist small and medium-sized businesses and an accelerated infrastructure programme.
The new government's recently announced small business relief package is designed to assist small and medium-sized businesses (which make up the largest proportion of New Zealand businesses) in order to reduce compliance and improve the business environment in the face of the crisis. The package includes a suite of 11 tax changes costing $480 million over four years, with around $270 million of extra cashflow remaining in businesses in the current financial year ending 30 June 2009, an expansion to the export credit scheme, extended jurisdiction for the Disputes (small claims) Tribunal, expansion of business advice services and a prompt-payment requirement for government agencies.
In addition, an accelerated infrastructure program consists of ‘ready-to-roll' infrastructure projects spanning the housing, transport, education and energy sectors at an estimated cost of almost $500 million, of which around $100 million worth of projects are expected to start in the 2008/09 financial year.