Data out late this week implied that New Zealand's economy
will have anything but a smooth ride this year. Exporters, in
particular, face another tough year with economists picking
the New Zealand dollar to stay consistently high this year.
On Friday, the kiwi was trading near US85c, with no sign it
was heading down in the near future. November's trade
figures, the most recent released by Statistics New Zealand,
gave no encouragement. The country's trade deficit widened in
November as New Zealand imported $1.18 worth of goods for
every $1 of exports. The trade accounts are usually in the
red in November but this was the largest November deficit
since 2006, Statistics NZ said.
The monthly deficit of $700 million pushed the annual deficit
to $1.5 billion, $190 million wider than in the year ended
October and $550 million wider than the year ended September.
The latest expansion in the deficit was in keeping with
recent trends, where exports have fallen while a gradually
improving domestic economy ensured imports grow.
All of that points to something New Zealanders have
experienced before; a domestic-led recovery which drives up
house prices, encourages higher borrowing and more spending.
New-car sales figures for the year ended December indicated
that householders were already doing just that - upgrading
their cars by sometimes using their overdraft facilities to
fund the purchase.
While the new-car sales figures were down, finance figures
provided by Financial Services Federation showed that motor
vehicle financing, while improving is nowhere near what it
was five or so years ago. Registered motor vehicle sales,
which is using property or the car as security, were only
marginally up on 2011. Somehow, New Zealanders are financing
their cars, and it could be by increasing an overdraft limit
against the value of their homes.
Quotable Value figures showed New Zealand property values
rose 5.7% last year, driven by gains in Auckland and a
recovery in Christchurch. Predictions are that the housing
market in the country's biggest city is set to keep climbing.
New Zealand's property market regained some momentum last
year after several years of being in the doldrums. The lack
of supply of affordable housing has become a political issue,
one which is sure to hit a chord with young people struggling
to buy their first property.
The economy is unlikely to get any help from overseas this
year. The European Central Bank has held its key interest
rates steady and looks to keep them there for some time amid
signs the euro zone debt crisis is stabilising. The lower
interest rates in major global economies means investors
seeking some return on their money are looking at New Zealand
and Australia where central bank lending rates are
significantly ahead of others, on a percentage basis.
While the Reserve Bank of Australia has room to move its
interest rates down, and in fact many pick the next move will
be down, New Zealand's central bank is expected to lift its
rates by the end of the year from the current low of 2.5%.
If it does, the kiwi will maintain its value, or worse,
increase. There was a thought the ECB would lower further its
current historic low of 0.75%, bringing it more in line with
Japan and the US. The criticism was that investors would then
be paying banks to hold their money rather than receiving
even a modicum of interest.
Some of the beneficiaries of low interest rates will be
various sharemarkets with cash-rich companies providing
investment income through strong share growth and dividend
payouts. New Zealand companies, like many others around the
world, are looking for investor interest to fund growth.
Investors can get solid income payments from blue chip
But emerging companies are also starting to look secure as
they strengthen their balance sheets and lower their debt.
As Government ministers return, they must show greater
leadership than was evident last year. The laissez-faire
model adopted by Prime Minister John Key and Finance Minister
Bill English needs refining. That is not an invitation to
adopt a ''hands on the lever'' approach to government. But it
is an offer to take on a leadership role that was missing in