Australian Prime Minister Julia Gillard says the latest turmoil on global financial markets will make the government's surplus track more challenging than thought earlier in the year, although the government is committed to its 2012/13 surplus promise.
However, Prime Minister John Key stuck to his view that strong growth in New Zealand was still achieveable despite signs of a dip back into recession in America and parts of Europe.
Australia is New Zealand's biggest trading partner, with policy makers here pointing to New Zealand's connections across the Tasman, and with growing Asian countries like China, as the driving force behind sustaining domestic growth out of the recessionary environment the New Zealand economy has been in since 2008.
Gillard was reacting as sharemarkets continued their plunge on Tuesday, with the S&P/ASX 200 down over 4.5% in early afternoon trade. The Australian dollar dropped below parity with its US counterpart today, after reaching over US$1.10 in the last few weeks.
Australian banks have slashed fixed-term mortgage rates today as markets see little prospect of a Reserve Bank of Australia rate hike in coming months, with talk firming that the Australian central bank will cut its benchmark rate in response to rising fears of another global recession due to economic weaknesses in Europe and the US.
Worse than expected effects of the Queensland floods on the Australian export sector have also led to calls for an interest rate cut by the RBA, and three-year-high inflation in China may force authorities there to raise interest rates, slowing domestic growth and therefore demand for Australian and New Zealand commodities.
"We have got strong government finances, we have been able to deliver fiscal consolidation which will bring the Budget to surplus in 2012/13," news.com.au reports Gillard saying.
"Events impacting on global growth make the challenge more difficult but we are working to return the Budget to surplus in 2012/13 as promised," Gillard said.
Here Key reiterates support for Treasury's 'reasonably conservative' growth forecasts
Gillard's comments came as New Zealand Prime Minister John Key said the economy here had a strong foundation to withstand shocks thrown at it by the current turmoil. Key has so far stood behind New Zealand Treasury predictions that the government would reach a budget surplus in 2014/15, as domestic factors like the Rugby World Cup and rebuilding in Christchurch would spur growth in the short-term.
"I sincerely believe that the growth forecasts put together were reasonably conservative. At the outer edge you may see slightly lower global growth - we always reflect on the situations as we find ourselves," Key told media this morning in Parliament.
"But for the most part I think we can take confidence from the fact that our foundation stones are much stronger than they were three years ago. We're not in a position where we have to go to the financial markets to fund the country - we've got plenty of cash, and we've actually got it at a low interest rate - our companies are in much better shape, there's still a lot more room our exchange rate could move now if we had to, the Reserve Bank has tools in the tool box," Key said.
"So I think from New Zealand's point of view, we can take a degree of confidence. As I say, we're not immune, but I think we're in better shape than the United States and Europe finds itself," he said.
Lower global growth could hurt an export-led recovery to some extent, although a drop in commodity prices would be coupled with a fall in the exchange rate.
"This has been a significant move by Standard & Poor's and the world is now taking stock of what that might mean. I think what it shows you [is] over the course of the next two or three months, there will be volatility, both in the domestic market here in New Zealand and internationally," Key said.
"But overall, all the government can do is make sure that your country is in the best shape that it can be, and I think, given the circumstances we inherited, and what we face, we are in tremendously good shape," he said.
33 Comments
Aussie sharres 'roar back' amid talk of QE III - http://www.businessday.com.au/business/markets/shares-roar-back-amid-ta…
Whew ! ..... That was a fun day on the ASX , Gareth ...... filled me Gummy Boots with bargains galore , as one does ....... many stocks are trading at lower prices than a decade ago , when they were much smaller businesses than today .
.. 7 to 12 % fully franked dividend yields ... Insiders buying their own stock .... Parity between market capitalisation and net tangible assets ......
...... if this isn't the time to back up the truck and get a full load , when is ?
1) If Olly has quietly bailed over the last three years and is sitting on a huge pile of cash ready to buy back in, yes indeed. However just how old is Olly? 70ish? 80ish? Otherwise, no....he like many PIs will be bankrupted...With huge drops coming and lots of mortgagee sales I cant see any other outcome.
2) Maybe Olly's kids....nothing wrong with paying rent when its a bear market.
10 year predictions, 1/3rd the cars we see today, petrol $5 a litre in todays prices ie bad most ppl will be walking, biking and using a buss. Unemployment in NZ circa 20%.....power shortages, food shortages. Lots of push bikes and fitter and thinner ppl....
regards
Vera - My predictions for 5 years out:
1. Olly will be bankrupt
2. Matt will own a house having picked up a place after a major fall in house prices, following several recessionary setbacks and economic shocks
you clearly don't understand the shit the world is in do you
Matt - I'd happily relieve of a bottle of Bolly on No. 1 even though it's a sucker bet - Olly didn't even go bankrupt when Landmark Corp went tits up.
On No. 2, mate, I would joyfully bring round a bottle if you grew some nuts and bought a place before the kids left school. Would even throw in a mega hamper of yummy treats for the house warming. (Has to be in a decent suburb, no ex p-labs in Waikikamukau just to score the goodies.)
Predictions for 5 years out .
1. Whether Olly Newland personally is rich will still be of no interest to me . But I wish him well .
2. Olly Newland will still be talking good , commonsense , and he will still be worth listening to .
3. Markets will fluctuate from where they are today , and as such , forecasts are absolutely useless , particularly those about the future .
Picking National to win a third term then , Wolly ? ....... going out on a limb there ! .. The Jolly Kid persona will only carry him so far , folks want results , a growing economy .
... after the coming election , the name " Goff " will be followed by the response , " who ? ".
weakening AUD good for Aus exporters Moa, although balanced by falling commodity prices
These things often cancel each other out
just like petrol - weakening AUD and NZ should push prices up, but this seems to be counterbalanced or more than counterbalanced by the slump in oil prices
I was read an email today from a guy that works in Aussie Banking, a guy with an MBA from Harvard. His call is for a major depression lasting 9-10 years, and that is from someone that doesn't get peak resources.
Caught a comment from the Daily FX analysts early today. They expect the NZD to put in a relief bounce to .8300 before heading south again. There weren't far off, with the bounce of .8250 and now we are heading south again.
If you study the Great Depression a little and listen to Steve Keen a lot, it should be obvious this is the biggest credit event for 150 years, if not ever. As a rule of thumb ive read that the downside of a depression is about 2/3rds of the time it took to build and we took 30 years to get here.....So 9 to 10 years down again sounds short, especially when you consider we are 3 years in....so over in 6 or 7? I cant see how it can be done.
Peak resources, look at the riots, how rough do you think it will get when these same ppl realise Peak oil? And ppl in cities across the globe? many are going to look like London....this is just for ipods, what happens when its food?
regards
Scarfie - MBA "means bugger all" in my view. Dime a dozen. He probably just learnt about conventional economics anyway. Personally I don't see depression - I see a long period of difficult stagnation though, weaving in and out of recession. But maybe this is just wishful thinking (scary that such a view might constitute an optimistic position!)
The interesting thing is the MBA was replying to a family member, so he was giving an honest appraisal. Actually the MBA was from MIT, but the concerns you share are probably the same. Guy also has an NZ LLB BCom. Has worked for 20 years in a senior role in mergers and acquisitions. Would you give him any more credit for that.
But I take the point about tertiary qualifications, I face doubts as to whether I require them. I have enough credits for a degree, but not in the same profession unfortunately. Another 3 years, plus 3 years work experience is a long road ahead. Particularly when the money is drying up and Architects are joining the dole queue.
There seems to be consensus there that the future is shaping up to be quite difference from the past:)
Australia have a free trade agreement with the US, so I guess they have more to fear than we do?
However, Mr Key is foolish to think that NZ will get back into the black on the back of economic growth. It's this mentality that got us into the global financial crisis Things don't keep going up and up and up and up.
Of course he is.....but what other option(s) does he have? Labour, National and indeed every political party are a 1 trick pony....."growth"......no growth and its.....um...........um........................um.......oh......
Latest pile of cr*p from treasury is an attempt to measure our well being in other terms not just GDP....so if the morons in that building uh I mean masters of the universe think its over, its over.
regards
Always on the cards when into oversold territory. Notice it has flattened off though. Always a few like GBH looking for a bargain, and perhaps he will get some. Expect lots to use the bearish run to take profit and run.
Check the RSI study on a graph, still doesn't look good.
The next day or two will be what counts.
What is really interesting is the head and shoulders pattern on the SPX500 monthly chart. If my understand is correct, then the fall from the right shoulder is typically as great as the height of the right shoulder.That would put the SPX back to 150, and my chart doesn't go back that far.lol.
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