25 Mar 2015
New Zealand: extended period of stable OCR settings expected - ANZ
FXStreet (Barcelona) - Con Williams, Economist at ANZ, gives the outlook for New Zealand’s economy, and comments on the policy settings, the impact of global risks, and the diary sector.
Key Quotes
“There was clear evidence in Fonterra’s business performance (dividend) of a hangover effect from the 2013/14 season and volatility in different dairy markets affecting margins of different businesses.”
“The sector can manage one tough year, but two in a row would be a real test. Tighter cash-flow will necessitate cuts in not just capital and discretionary expenditure, but core operating expenditure to avoid a debt blowout. This will create some gestation issues across the economy.”
“The economy has pep from other sources to absorb low pay-out challenges. The outlook for the economy is still respectable (supported by accommodative financial conditions, record net immigration and elevated confidence). However, we are mindful of the frictions and tensions present from the global backdrop, which risks impacting other commodities (and is in some quarters) and demand, with the situation being complicated by a NZD that remains elevated and near post-float highs against some major trading partners.”
“Our base case remains an extended period of stable OCR settings, but the RBNZ will continue to closely follow the global scene and commodity price outlook.”
Key Quotes
“There was clear evidence in Fonterra’s business performance (dividend) of a hangover effect from the 2013/14 season and volatility in different dairy markets affecting margins of different businesses.”
“The sector can manage one tough year, but two in a row would be a real test. Tighter cash-flow will necessitate cuts in not just capital and discretionary expenditure, but core operating expenditure to avoid a debt blowout. This will create some gestation issues across the economy.”
“The economy has pep from other sources to absorb low pay-out challenges. The outlook for the economy is still respectable (supported by accommodative financial conditions, record net immigration and elevated confidence). However, we are mindful of the frictions and tensions present from the global backdrop, which risks impacting other commodities (and is in some quarters) and demand, with the situation being complicated by a NZD that remains elevated and near post-float highs against some major trading partners.”
“Our base case remains an extended period of stable OCR settings, but the RBNZ will continue to closely follow the global scene and commodity price outlook.”