By Alex Tarrant
Prime Minister John Key is confident Treasury's Budget forecasts will hold up in the face of renewed financial market volatility which has flared up since they were finalised last month.
He told media in Christchurch today that Treasury was taking into account the turmoil in Europe, and that it had already downgraded its global growth forecasts before the latest bout of volatility this month. The government would not be making adjustments based on events over the last two weeks, and was making decisions based on the next few years, not on daily and weekly reports.
While Finance Minister Bill English is set to reveal Budget 2012 next Thursday, the economic forecasts in the Budget would have been completed before the end of April, raising questions of how the latest round of how the latest events in Europe would have affected the projections.
See yesterday's article, Latest Euro turmoil, commodity price and NZ$ falls right at the wrong time for Treasury and its Budget 2012 forecasts.
A failed Greek election on May 6, and an election in France seen as an anti-austerity vote, have been the main drivers of the New Zealand dollar falling by seven percent against the US dollar since the end of April.
Prices of dairy products sold through Fonterra's on-line auctions hit a three-year low this week, and the general level of New Zealand's commodity export prices is at an 18-month low according to ANZ's latest commodity price index released at the start of May.
New Zealand's unemployment rate unexpectedly jumped to 6.7% in the first week of May, and some bank economists have been pushing out their expectations for the next hike in the Official Cash Rate into 2013 due to global volatility, a slow Christchurch rebuild and sluggish local data for the March quarter.
Conservative Budget
Key said the government had put together a conservative budget which "reflects the times."
"That is, we’re not spending any new money, we’re asking New Zealanders to make some adjustments to what they’re doing, and we think rightfully so, because we don’t want to put more debt on the New Zealand economy," Key said on Thursday afternoon.
“I think that’s the right thing to be doing, and we wouldn’t be adjusting that on the basis of anything that’s happened in the last two weeks," he said.
The falling New Zealand dollar and commodity prices were reflecting the international turmoil, and were to be expected given that volatility.
“We live in a dynamic world, so those numbers constantly change as we know. Clearly there’s more stress in Europe at the moment, and that’s putting pressure on the international financial markets. You can see that with the stock market down and commodity prices being down," Key said.
“But overall, we’re very confident about where New Zealand’s going. I think it’s important to understand, we need to run the country not on a minute by minute, week by week basis, but by what we think are the right decisions over the course of the next 12 months and the next few years.
"And we can’t get spooked by the fact that the Greeks can’t make up their mind about who they want to be their government," he said.
“We factor in a number of things. Treasury takes account of what’s happening in Europe. We downgraded our global forecasts some time ago. The position might look completely different in a month’s time as well."
29 Comments
I think the term is the straw that broke the camel's back.....So while yes I agree when china goes we will cop it and big time, I wouldnt dismiss Greece/EU from not doing the same thing....Everything is so inter-connected & fragile that like a house of cards when one goes it all goes.....
regards
Yeah Ive switched on adblock as its really annoying...sorry BH but too much in my face....
Interesting thing on the ads is contemplating who they are targetting....so farmers? tradesppl? is that interest.co.nz's readers? guess so.....how about a real 4wd.....say Rangee....now I can look at those all day...pieces of art that work...
What do PIs buy? XR6s? (large, tacky and empty?)
;]
regards
Yah. adblock switched on for me too.
Been coming to interest.co.nz since 2008.
While I understand the need for advertising, the tipping point was reached on this site and I switched adblock on for interest.co.nz
I use Mobile Broad Band for most of my browsing. So I would prefer text based ads or lite weight pics.
That mitsi ad was too big a kumera to suck.
To balance that out, I'll click on the http://www.efinancialcareers.com.au/ ad every second day to give Bernie some click throughs.
You can look at the filter rules in effect by either clicking on the ABP stop sign icon or CTRL-SHIFT-V
I'm pretty much:
blocking ads.adhub.co.nz
using fanboys list
Allowing non-intrusive ads as per fanboys list (note Bernard - you might want to check that list out and work out how to get some of your ads on that list)
"Greece is a nothing player in almost all commodity markets."
You can't be serious! NZ by global standards is also a "nothing player" in commodity markets. The only commodity market that matters is all energy related, but......that does not dismiss the fact that Greece failing will have a major impact on the Euro along with Spain when their banks fail also.
Talk about niave IF you truly believe that will not impact NZ. You must think NZders are the only ones buying our government treasury bonds?
Dead right, this Greek affair is, whilst highly entertaining, a side show.
I hate to think what the outcome of the main show might entail - you must have nerves of steel or other people's money to play with - but not often I guess, otherwise your comments would be a little more concilatory. The move in the US Government bond market alone has been humungous - many big value DV01 moves for the 10 year. Similar life changing moves have been recorded here as well in the NZ Government Stock market.
Dealers long these positions are swinging from the chandeliers.
While others?
Key says: “But overall, we’re very confident about where New Zealand’s going."
I agree that New Zealand is a good place to live by any standards, has great resources, generally good and resourceful people, a useful history of the rule of law and non corruption among other assets.
Implied in his statement though is that we have a sound government that is enacting good policies. On this its hard to be remotely confident. This article suggests a total lack of urgency in a troubled world, which just adds to that sense of ideologically driven incompetence.
We already have a current account of 4-5% of GDP?, so say $10 billion a year. Dairy and other export prices are collapsing. (not their fault, but you sense he is indifferent, while sitting on his hands) Unemployment is increasing, even though the safety valve of our best and most willing leaving for Australia and elsewhere is fully open.
The cumulative current account deficits of many years mean we now own very little that is useful. And the Nats still are aggressively selling whatever assets they can. Where is the contra scorecard that suggests some upside based on the government's activities? I cannot think of a single positive variable that you could attribute to them. I'm sure they will say it would have been worse otherwise, but am not sure how. ments that.
Motherhood statements that we are very confident in our direction don't wash. Show us the evidence.
Intelligent, economically literate people can see through the rhetoric, the moterhood statements, but more than 80% of thepopulation probaby cannot.
I agree that much of the negative influences are beyond the govt's control, but I also agree with you that there are plenty of urgent things they could have done to have made NZ more robust in the face of these headwinds
They have not done these things for a number of reasons, including incompetence, complacency and ideology
I'm pleased to see that Key and the National government are taking the Buffet approach.
Warren Buffet has said that if you base your investment decisions on reacting to every single headline that comes along, then you're on a hiding to nowhere. It's the long term approach that is key, and that pays off the most. it’s getting the fundamentals right. And given the time frame that nation states operate in..................
It’s a nice change from the neurotic knee-jerk reactionism of Labour governments, which largely got us into this debt mess.
Propaganda at its best....rot....Muldoon ramped up the debt, Labour finally paid it off. The private debt mess was our choice to make in gambling in housing...and if HC etc had stood in our way we would have voted them out.....so dont blame Labour, blame yourselves.
Oh and fundimentals are ignored by Key and National, he who recently said he didnt understand why we were not growing at 6%....
regards
Mwahahhahhahahaha
The National Government taking the Buffet approach? Is this opposites day?
Yah. I'm sure Buffet would agree with selling off assets that have wide moats and high barriers to entry. (John Banks selling of Auckland Airport shares comes to mind)..
Selling off monopolies. Buffet would never agree to sell a monopoly.
Yah I can see Buffet agreeing with that sort of Bollocks
Not.
Four years ago New Zealand's net public debt was about $20b. Now it is around $50b, and we haven't ended 2012 yet. Forecasts show that in three years, it will be around $73b.
(See graph here courtesy of goldsilver-money.blogspot.com)
If this level of exponential increase continues, we will suffer enormously. We will cede control of our nation to those we borrowed from. The Chinese Government, private bankers and wealth funds worldwide. Like Greece and the other PIIGS we will have to make stark choices. It will happen.
Perhaps John Key and Bill English are doing the right thing by selling public assets here in New Zealand now. Are they being wise enough to see the 'debt' writing on the wall. You see, we do not want to be in the situation that Greece is in before realising we need to pay off the bankers.
A fire-sale of assets in New Zealand would be a disaster. A New Zealand in this position would mean an unstable living situation for all of us. Would we then see radical groups take their oportunity here to take advantage of rising public anger to sympathise with their causes? Maybe.
Asset sales are supposed to lower the crippling public debt to more comfortable levels. But I say it will not be enough. What are the other choices for New Zealand? Perhaps we devalue our currency to lower debt value. But imagine the hardship on the ordinary citizen that would result in. But it's probably the best political option. Stealing from the masses always has been. Just do it quietly.
Greece is currently going through the pain of austerity. Greece is the first 'developed' nation example of what it means to be over-indebted. Simply put, it means you don't have a nation anymore.
Is it any wonder that right and left wing extremist parties are capturing up to 20% of the vote there. This cannot bode well for Greece. When you threaten to take away someones livelihood, that's stressful enough. But when the people see unelected eurocrats backed by private bankers, run your country and want to sell your assets at bargain basement prices, then you run the risk of awakening the ire of ordinary citizens.
Private interests are seeing bargains galore coming up in Greece (New Zealand?). This is what happens when you get into too much debt. You pay with your past wealth accumulation, but you pay whatever the piper offers because your power to bargain is zero.
Greece and now Italy and soon others will have to make some dark choices soon. Going back to the Drachma will be paramount to ongoing success in Greece. Yes, it will be a difficult few years after, but if Iceland's story is to be admired, then Greece should only look in that direction.
New Zealand , are you ready for what is coming?
Smitho - checking on figures - no we are not. Business as usual.
http://www.stats.govt.nz/tools_and_services/tools/TableBuilder/exports-and-imports-tables.aspx
Or does the $ have to drop so we can keep paying the yield demanded by the top?
Hypertiger
Interest rates are not under the control of the top.
Once the bottom has reached their maximum potential to support all the morons above...All the delusions those above cherish begin to shatter.
All the middle class wannbe top worshiping morons that think your masters have magic powers to compel poor people to supply your unquenchable thirst for power...lololololol.
When the bottom is exploited to the maximum potential and can no longer supply the top with the positive yield they demand...the policy is ZYR
Zero yield rate policy...lololololololol.
This was in the comment section of Zerohedge. Thought it was applicable.
"The machines of the oligarchy need individuals who are good equivocators, who are skilled at telling half-truth's and 3/4 lies to keep the gears grinding up the little people, the wheel of fortune turning their way, at the expense of decency, liberty, justice, prudence, sanity.
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