By Roger J Kerr
It is a real worry when credit rating agency Standard & Poor’s is more upbeat on the NZ economy and the Government’s economic management than the dreary doomsday commentaries we get from local economic commentators.
However, the external viewpoint of our economic position and outlook is always constructive and informative, albeit institutions like the IMF, World Bank and OECD always seem to be about six months behind the 8-ball in their assessment of what is going on in the NZ economy.
Which brings me to a potential issue with monetary policy management by the RBNZ over coming months as they transition from Governor Bollard to Governor Wheeler.
Understandably, Dr Graeme Wheeler will be much better informed on the global economic picture than micro and macro economic matters within New Zealand, having been out of New Zealand for many years.
The new Governor will therefore be relying heavily on his officials for the peculiarities and specific pressures that cause inflation to increase in the domestic New Zealand economy.
The first question he should ask is whether the RBNZ’s current forecast of continuing decreasing agricultural commodity prices right through 2012 is likely given the US drought and feed grain prices spiralling upwards.
The next question Governor Wheeler should ask is how much does the 'wealth effect' from rising house prices really impact on consumer demand and thus inflation.
My view has always been that rising inflation in New Zealand always comes from the supply side and not the demand side.
Therefore, Graeme’s third question should be about capacity, competition and price trends in the building industry in New Zealand over the next 12 months given the Christchurch rebuild, the big catch-up going on in Auckland and demand generally exceeding supply.
I am hoping that Dr Wheeler already understands the most important economic lead indicator for GDP growth in New Zealand is the rate of grass growth.
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* Roger J Kerr runs Asia Pacific Risk Management. He specialises in fixed interest securities and is a commentator on economics and markets. More commentary and useful information on fixed interest investing can be found at rogeradvice.com
1 Comments
Before all that I'd ask if he believes like his predecessors, overseas counterparts and self interested/conflicted academic hacks in that neo-liberal cult that has screwed over the bulk of the population in the west for the last 30 odd years, that has resulted in escalating financial crises and massive debt and who now promise more of the same as a solution. If he says yes, suggest he applies for a job where he can do less damage.
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