GDP Numbers Growing in New Zealand
We have seen many interesting forex moves over the last few months and new opportunities are arising in the NZD/USD. Currently, New Zealands inflation rate is a low 0.4 percent, way below the goal of 1-3 percent. Some analysts suggest that we will be seeing a trimmed interest rate in the country by the end of this year.
The Official Cash Rate or OCR left by the Reserve Bank of New Zealand was unchanged at 2 percent at its last meeting despite having house price inflation that have been classified as being excessive. The country still suffers from low inflation rate by continuing negative tradables inflation, and this is something that could impact live currency rates in the NZD/USD for the next few months.
Central Bank Comments
Reserve Bank Governor, Graeme Wheeler in his statement said that further policy easing could be done to increase inflation:
Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.
Despite having low inflation, New Zealand is doing well with its low unemployment rate and rising wages, as explained by Finance Minister Bill English:
Despite international turbulence and global uncertainty, New Zealand is in the unusual position of enjoying solid growth, rising employment, and real wages at the same time as low inflation.
New Zealand grew at a rate of 3.6 percent from last year, and there is currently no sign of it decreasing. New Zealand is keen on keeping the inflation rate between 1-3 percent focusing on the midpoint, and a rate cut on November 10 maybe cannot be ruled as explained by Philip Borkin, an ANZ Senior Economist:
Despite the growth backdrop arguing for no cuts, this soft inflation environment leaves the official cash rate biased to the downside, with 3Q CPI figures unlikely to stand in the way of a November cut.
NZ Government Spending
The Governments strategy of restraining growth in spending is still in place for a surplus of NZ$1.8 billion has been recorded for the year ended June 2016. Tax revenue is also showing that the economy is growing over the years, as tax revenue was up 5.7 percent with all the main types of taxes seeing growth.
It is the first time since 2006 that the expenses have fallen below 30 percent of GDP, expenses grew at a slower pace at 2.2 percent bringing expenses to GDP at 29.4 percent. This will continue to impact trends in the NZD/USD. The government most likely will remain in this way as they aim to repay debt while providing better services:
The Government will continue to focus on responsible fiscal management and repaying debt while investing in public services to get better results for New Zealanders, meet its net capital requirements and improve infrastructure.
We have seen many interesting forex moves over the last few months and new opportunities are arising in the NZD/USD. Currently, New Zealands inflation rate is a low 0.4 percent, way below the goal of 1-3 percent. Some analysts suggest that we will be seeing a trimmed interest rate in the country by the end of this year.
The Official Cash Rate or OCR left by the Reserve Bank of New Zealand was unchanged at 2 percent at its last meeting despite having house price inflation that have been classified as being excessive. The country still suffers from low inflation rate by continuing negative tradables inflation, and this is something that could impact live currency rates in the NZD/USD for the next few months.
Central Bank Comments
Reserve Bank Governor, Graeme Wheeler in his statement said that further policy easing could be done to increase inflation:
Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range.
Despite having low inflation, New Zealand is doing well with its low unemployment rate and rising wages, as explained by Finance Minister Bill English:
Despite international turbulence and global uncertainty, New Zealand is in the unusual position of enjoying solid growth, rising employment, and real wages at the same time as low inflation.
New Zealand grew at a rate of 3.6 percent from last year, and there is currently no sign of it decreasing. New Zealand is keen on keeping the inflation rate between 1-3 percent focusing on the midpoint, and a rate cut on November 10 maybe cannot be ruled as explained by Philip Borkin, an ANZ Senior Economist:
Despite the growth backdrop arguing for no cuts, this soft inflation environment leaves the official cash rate biased to the downside, with 3Q CPI figures unlikely to stand in the way of a November cut.
NZ Government Spending
The Governments strategy of restraining growth in spending is still in place for a surplus of NZ$1.8 billion has been recorded for the year ended June 2016. Tax revenue is also showing that the economy is growing over the years, as tax revenue was up 5.7 percent with all the main types of taxes seeing growth.
It is the first time since 2006 that the expenses have fallen below 30 percent of GDP, expenses grew at a slower pace at 2.2 percent bringing expenses to GDP at 29.4 percent. This will continue to impact trends in the NZD/USD. The government most likely will remain in this way as they aim to repay debt while providing better services:
The Government will continue to focus on responsible fiscal management and repaying debt while investing in public services to get better results for New Zealanders, meet its net capital requirements and improve infrastructure.