COM 0500.001 1996-1998 - Laserfiche WebLink

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J.IG hicLay Limited: Changing an Economy by Changing us Public Sector Page ~ • A consistent business environment. • Substantial GDP growth (as high as six percent per annum in 1990. The New Zealand economy is now 18.5 percent larger, in real terms, than it evas in 1991. • Reduced inflation (see below). • By the Reserve Bank Act, the bank's Governor has statutory independence. Under a contract with the Government, he must manage monetary policy, etc, to maintain the underlying rate of inflation in the range of zero to two percenti~. As a result, New Zealand's inflation is now lower than that of most of its trading partners, a significant advantage for the country's exporters. • New labour laws based on employment contracts, with dramatically increased productivity. • Contrary to the trend in most countries, foreign debt is being retired. Lower debt is critical to the country's security against trade fluctuations and international shocks. Net public debt is projected to reduce from 52 percent of GDP in 1992 to a much more prudent level in 1999 of 17.7 percent, roughly equal to the position New Zealand enjoyed in the late 1970s. All foreign public debt will be retired by 1997. • In January 1996, Standard and Poors upgraded New Zealand's credit rating to AA+ (higher than that of Australia and Canada). Later in the same month, Moodys (who had already placed New Zealand on a Positive Credit Watch) also upgraded its rating. • By November 1995, the unemployment rate had dropped to 5. 91 percent (significantly lower than Australia and third lowest in the OECD, with only the USA and Japan at lesser levels); and is projected to drop further to 5.5 percent in 1996/97. Job growth in the New Zealand economy has been three times faster than the OECD average. • The Balance of Payments on Current Account improved strongly through to 1994 on the back of growth in export volumes. Over the past year, the deficit has widen again as the economy has expanded. Imports of capital goods, in particular, rose as investment grew by nearly twenty percent. The Current Account deficit is currently at about 2.6 percent of GDP, which is believed to be manageable. • Previous declines in the New Zealand dollar have now stabilised; and its value has appreciated slowly against most currencies in the last three or four years. Underlying inflation measures price increases without the inclusion of government chazges or mortgage rates.