Briefing Notes for the Launch in Canberra, Australia, April 2007
New Zealand's economic performance – briefing from the Survey
- The economy continued to grow at 1.9% in 2006, which was at a slightly weaker pace than in 2005, and a significant slow down compared to 2004 when growth was 4.2%.
- Domestic demand remained weak, which prompted decline in imports.
- The trade deficit has narrowed since late 2005. International prices of the country's key primary commodities have risen to near historic highs in recent years.
- Growth of agricultural exports was offset by weak manufacturing exports due to a strong currency, international competition, and increasing input costs.
- The current account deficit remained high at 8.8% of GDP in 2006, although it declined from 2005 (8.1%).
- The inflation rate edged up from 3.1% in 2005 to 3.4% in 2006. The consumer price index recorded increase; 4% in the 2nd quarter and 3.5% in the 3rd quarter of 2006.
- Weaker consumer demand and business investment will keep GDP growth subdued. Economic growth is expected to be moderate at 2.0% in 2007, although a rebound may be expected the following year.
Background information (Not in the survey)
- The slow down of domestic demand largely reflected the end of the housing boom and a slowdown in employment growth. Nevertheless, employment growth continued and some rebound was observed in the housing market. Housing prices remained high and activity in the housing market was relatively robust.
- Weak household expenditure also reflected the higher cost of oil and households' efforts to readjust to the higher debt servicing costs resulting from the increasing interest rate.
- Capacity was tightening in the labour market. The unemployment rate was at a historical low and the labour force participation rate has increased. The tightening labour market resulted in wage growth.
- On the one hand, wage growth encouraged domestic demand growth which was otherwise weakening, but on the other hand, wage growth raised concerns about inflationary pressure.
- Imports contracted, mainly due to reduction in capital equipment and intermediate goods, along with weaker domestic demand.
- The trade deficit narrowed but the income account continued to run a large deficit, largely reflecting the cost of servicing debt, the low domestic savings rate, and repatriation of profits by foreign companies operating in New Zealand.
- Inflation concerns in reaction to the tightening labour market led to the official cash rate being gradually raised since 2004. Conversely, slower economic growth indicated that inflationary pressure was easing, and that there might be a need for easing monetary policy.
- The fiscal position remained strong, with a budget surplus of 4.4% of GDP in 2006 compared to 4.8% in 2005.
Special chapter on Gender
- New Zealand is free from many of the urgent issues discussed in the chapter such as access to education and access to healthcare. New Zealand is ranked among the top 25 in the gender gap index.
- Economic participation of women is also among the highest.
- The proportion of women in parliament is the highest in the region, although the rate alone does not necessarily indicate women are politically empowered, as suggested by the evidence from South Asia.
- New Zealand also scores well in terms of the gender gap in political empowerment.