Part two: A dollar a day
Part one: Check your wallet
New Zealand is one of the countries in the OECD with the lowest levels of government debts, when expressed as percentage of GDP.
The term is meant to be disparaging, but I find it incredulous that many economists still see their discipline as a science – let alone a dismal one.
BERL stands by its assessment of Labour Party Fiscal Plan costings
At the beginning of this year it was widely expected that, having spent five years below the Reserve Bank’s 2% target rate, inflation would start to increase. And, lo and behold, it did. In the March 2017 quarter, the annual rate of increase in the CPI reached 2.2%.
The good news from the GDP data for the March 2017 quarter was of continued growth, with expansion of 3.1% for the year confirmed. However, the good news hid the rather sobering news of the export sector contracting for the third consecutive quarter. Consequently, exports for the March year reportedly grew by a meagre 1.2%, as meat, textiles, and metal and machinery products all slumped with sizable negative growth recorded.
Taking the definition of inflation as an increase in the price level of goods and services that the Reserve Bank of New Zealand (RBNZ) uses. And combined with the Policy Targets Agreement (PTA) which specifies that this measure should remain at 2% on average we could be forgiven for thinking inflation is a non-issue right now.
Put simply, the country faces the prospect of much larger numbers of old people living longer, and the question of how they can continue to be supported financially demands to be addressed.
One of the most contentious and enduring issues in the political arena is health expenditure, and whether it has increased sufficiently.
Average annual core retail price inflation turned positive for the first time in nearly four years this March.
As we suggested earlier in the month, the Budget has bent over backwards to signal that all is well with the economy and, consequently, the government’s books. Further, the initiatives and new programs do their best to indicate there are new measures to tackle the pressing issues of the day.
Tax Management NZ (TMNZ) is working with New Zealand charities to ensure a portion of the near- $232 million in unclaimed donation rebates can go back to charity.
This year’s Budget has all the hallmarks of one ‘treading water’. There will be strenuous efforts expended to make it look like something is being done; but, without the will to wish to do anything. With the accounts showing a borderline surplus (or deficit), the chances of any significant tax relief will remain on the backburner.
Almost day after day of late, the NZX50 seems to hit new record levels. As at the time of writing (close of business 19 April 2016), the NZX50 was at an index level of 6,868.04.
New Zealand’s economic growth prospects can continue to be seen as either a glass half-full, or as a glass half-empty, according to BERL’s latest assessment.
The widely expected OCR cut was not the most significant aspect of September’s Reserve Bank Monetary Policy Statement. The far more significant aspect was the somewhat jaw-dropping downgrade in the economic forecast picture that the Reserve Bank now paints.
While New Zealand’s economic growth for the next couple of years will be slower than in recent times it is set to remain positive, according to BERL’s latest assessment of the situation and prospects for the New Zealand economy.
Birds-Eye View (Incorporating June 2015 issue of BERL Forecasts) BERL forecasts weaker short-term growth as shadows hover Three months ago we tentatively titled our forecast ‘a post-dairy era’.
Please click on the following link to the article ‘There is a plan – Budget 2015’
The New Zealand dollar hit A98.47c on the 31st March, setting a new record high against the Australian dollar and getting ever closer to reaching parity with the Australian dollar. The New Zealand dollar has been increasing in strength against the Australian dollar over the last five months after hitting a low of A88.80c in early November 2014.
The Reserve Bank has kept the Official Cash Rate (OCR) unchanged at 3.5 percent during its last OCR announcement (12 March) despite forecasts indicating that CPI inflation will fall to zero for the March 2015 quarter.
The Consumers Price Index (CPI) rose 0.3 percent between the June 2014 and the September 2014 quarters. This upsurge follows the rise of 0.3 percent for the June 2014 and the March 2014 quarters.
Statistics New Zealand (Statistics NZ) recently announced the results of its 2014 review of the Consumers Price Index (CPI). Statistics NZ undertakes a review of the CPI every three years in order to ensure that the CPI basket of goods and services accurately reflects the main items and services New Zealanders buy. This way Statistics NZ can accurately calculate price changes each quarter.
This note is to state for the record that BERL strongly affirms the robustness of the Capital Gains Tax (CGT) calculations provided in 2011 to the Labour Party.
This month’s fiscal accounts are a story of unexpected revenue, and rosy gains and losses forecasts.
Modest, targeted spending increases sit behind Budget 2013. The Minister of Finance, Hon Bill English, indicated that the Government will return to surplus by 2014/15. Hailed as a budget that was building momentum, Budget 2013 indicates a slow and cautious approach whereby no money will be set aside for capital spending over this and the following three Budgets, and any new capital spending will come from the existing balance sheet.
This note assesses whether progress has been made towards rebalancing the underlying structure of New Zealand’s macroeconomy. We explore five influences driving New Zealand’s macroeconomic imbalances – tradable sector activity, the burden of inflation control, net external trade receipts, expenditure in the domestic sector, and the direction of finance.
The Reserve Bank (RB) left the OCR unchanged at 2.5 percent today (14th March) suggesting that it will stay there “through to the end of the year”.
Treasury lowered its forecast 2014-15 surplus to $66 million (on the Total Crown OBEGAL measure), but is still holding out for a surplus.
The latest food price data release confirms the ongoing decline in food prices. November data shows food prices have been below year-earlier levels for six out of the last seven months, with October being the only exception.
From October 2011 to October this year, food prices have risen 0.3 percent. This is the first rise in food prices since April this year. The main driver behind this rise was increased fruit and vegetable prices.
Food prices eased in September, down by 0.9 percent on the previous month and 0.3 percent on the same month last year. This is consistent with international prices, which are down 4.1 percent on the year. Prices are expected to recover along with the global economy, but also because of unfavourable growing conditions in India, Europe and the US.
As we expected, the risks identified in the Treasury’s July Monthly Economic Indicators squeezed the positives according to the Government’s just released annual accounts for 2011/12. Initially, the latest annual government accounts looked like some positive reading: Core Crown revenue was up 5 percent, and expenses down by 2 percent on their 2011 levels. But in dollar terms, as revenue was only $60.6 billion while expenses were $69.1 billion, the Government ran a deficit.
Food prices increased marginally in August – by 0.1% according to Statistics New Zealand’s latest release of its food price index. The most significant increase came from fruit and vegetable prices, which were 1.5% up in August. Prices for fruit and vegetables tend to rise in winter months and have been rising month on month since April.
Since June this year, food prices have increased by 0.2 percent according to Statistics New Zealand’s latest release of its food price index.
Treasury’s latest Monthly Economic Indicators conclude that the “domestic economy is looking in relatively good shape”, while acknowledging that “the global outlook worsened further in July, with downside risks increasing”. It sees “a pick up in coming quarters” that will see inflation accelerate and spare capacity be absorbed (by growth).
GDP grew 1.1% in the three months to March 2012, taking annual growth to 2.4%. The figure was a positive surprise, incorporating conservative growth in primary and manufacturing industries and nearly flat domestic spending. Looking at the detail however, the quarterly figure was helped by a large increase in the statistical discrepancy. Without this contribution growthbin the March quarter would have been a more modest 0.6%.
The latest fiscal accounts (for the 11 months to May 2012) have some positives in them, and continue a recent trend of applying discipline (but not austerity) to the government accounts. The following table and figures summarise the actual and forecast Core Crown accounts.
The month of June saw food prices increase by 0.2 percent according to Statistics New Zealand’s latest food price index.
In releasing its latest quarterly assessment of prospects for the New Zealand economy, independent forecasters BERL paint a dismal picture for the immediate future.
First, returning the government’s books to surplus by 2014/15 despite an increasing austere global environment is achieved through a forecast surplus of $197 million in that year. This is $1.1 billion lower than last year’s Budget forecast for that year. Thereafter, the fiscal surplus is set to grow further to reach $2.1 billion in 2015/16.
Treasury has released the final set of fiscal accounts before the release of the Budget in about a fortnight. The media release, however, is slightly misleading, as it does not always clearly distinguish when it is referring to Core Crown versus Total Crown figures. So while the government deficit is still bad, the actual figures are perhaps not as bad as one might interpret from a scan of Treasury’s media release.
Treasury regularly publishes data on the monthly tax take – the tax “outturn” data. These publications are usually released about six weeks after the end of the month. It is some of the earliest data available on how the economy is tracking. The data are reported for both “receipts” (cash that has been received by the collecting agency) and “revenue” (tax that is due, but which may not have actually been paid yet). The latter is an accrual measure, and is the most useful for gauging activity.
Alan Bollard believes it is prudent to hold the OCR at 2.5 percent, where it has remained since March 2011.
According to Statistics New Zealand’s latest food price index, overall food prices in March were down 1 percent compared to February. In addition, prices were down for all five broad categories: fruit and vegetables, meat, poultry and fish, grocery food, restaurant and ready-to-eats, and non-alcoholic beverages.
The farm-gate value of dairy, sheep and beef products grew by 58% from $10.2 billion in the 2006/2007 season, to $16.3 billion in the 2010/2011 season – but greater investment in pasture renewal could have boosted growth even further.
The latest financial statements for Treasury for the seven months to January 2012 show a big hole in the fiscal accounts.
The Capital Goods Price Index rose 0.4 percent in the December 2011 quarter, taking the annual increase to 1.1 percent. This slight upward trend follows a very subdued period where the index remains at the same level as the June 2009 quarter.
Overall, food prices in January 2012 didn’t change from December 2011. For the year however, food prices were up by one percent.