Here's my summary of the key news overnight in 90 seconds at 9 am, including news China has surpassed the US to become the world’s biggest trading nation last year as measured by the sum of exports and imports of goods, official figures from both countries show.
In Europe, EU leaders have agreed to a seven-year budget that cuts spending for the first time, bowing to British Prime Minister Cameron’s insistence on thrift.
The new budget is three percent less that the previous one, which will see Brussels spending €960 billion (NZ$1.5 trillion) over the next six years.
The Bank of England is expected to cut its growth forecasts this week and warn that the squeeze on family finances will last longer than expected in a prediction likely to douse recent hopes that the UK was heading back to recovery.
Venezuela has devalued its currency exchange rate with the dollar, a move aimed to address shortages of basic goods as importers struggle to get a hold of hard currency.
But no-one really expects that a lower currency will magically make Venezuela into a manufacturing powerhouse. Some special-interest manufacturing groups in New Zealand should watch and see how successful that devaluation really is.
Japan is another country that has recently devalued its currency via monetary policy, and even they are having their doubts.
Today we will get the important national house price data for January from QV, and the REINZ data won't be far behind.
The kiwi dollar starts the day at 83.6 USc, 81.1 AUc, and the TWI is at 75.8.
No chart with that title exists.
1 Comments
David,
Am not sure you enhance your credibility by using Venezuela as a comparative model country, and then by implication as a reason to stay on our current blinkered course. They have had a fixed exchange rate with capital controls, of 4.3 bolivars to the USD for some 9 years; and have just announced a devaluation to 6.3, or a near 50% devaluation. They export oil, and really only oil; their devaluation is caused by overwhelming government control and incompetence. A comparison with our Muldoon years may be relevant, but not now. With a half decent economy, any manufacturer would be happy with a long term stable currency.
From the article you link to, the Japanese second thoughts seem to be only that the yen has devalued so fast since November that it will almost certainly cause retaliation; not that it doesn't work in boosting manufacturing. I note that the Japanese currency is still about 33% above its long term average against the USD leading up to the GFC.
The NZD is 50% above its 2008/9 level; noting that Japan has had one of the world's largest current account surpluses in that time. We of course are heading to one of the largest deficits.
To deny the effects on the competitiveness of manufacturers and other trading companies, of a 50% lift in their costs; especially of costs out of their control, like all government and quasi government costs, including power, gas etc, is head in the sand denial. For the government to appear to be impotent in a perpetual ongoing appreciation also gives a strong message to manufacturers to base anywhere but here.
If the government and RB really want to defend their position, they really need to do better than tired comparisons with Zimbabwe, Venezuela etc. If you wish to be their cheerleader, you need some better evidence.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.