Academic journal article The Reserve Bank of New Zealand Bulletin

Handling Our Economic Recovery: Date 6 May 2010

Academic journal article The Reserve Bank of New Zealand Bulletin

Handling Our Economic Recovery: Date 6 May 2010

Article excerpt

New Zealand's recovery from the Global Financial Crisis is entering a new, less fragile stage, which will allow monetary policy stimulus to be removed, Reserve Bank Governor Alan Bollard said today.

"New Zealand has been fortunate in some respects, allowing most of our crisis liquidity and guarantee measures to be terminated. Conventional monetary policy will now guide the stages of recovery," Dr Bollard said in a speech to the Otago and Southland Zones of Local Government New Zealand in Dunedin.

"Overall, we are emerging from the crisis with some reconstruction of our external deficit, as a result of strong exports, weaker import growth, suppressed domestic profits, and some consolidation of balance sheets."

On the other hand, the domestic sector is seeing a more fragile recovery, with business bruised but not permanently scarred. It is behaving very cautiously, still not looking to invest in plant and equipment or re-employ staff.

"Banking sector credit data continues to be extraordinarily restrained. Whatever the explanation, we certainly wish to see credit available for all sound business ventures."

In the household sector, there has been only a soft pick-up in house prices, new building and sales. Householders are building up savings and reducing debt.

Dr Bollard said the stage is set for the Bank to influence the pace of recovery through more conventional discretionary monetary policy. …

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