Monday it was booming house prices, Tuesday it was booming retail sales: the New Zealand economy is starting to be buffeted by pressures that are proving almost impossible to control without causing wider damage.
House prices rose at an annual rate of 9.3 per cent last month and yesterday the Government said retail sales rose 0.5 per cent in the same month, double expectations.
Both indicators came only days after the Reserve Bank of New Zealand raised interest rates to a record 7.5 per cent. Now analysts are factoring in another rate rise before too long simply because the rise in house prices and retail sales were too strong.
Interest rates at 7.25 per cent obviously failed to choke off the surge in house prices, which seem to have accelerated in the past quarter, while the retail sales figure shows that consumers are spending with their ears pinned back (and no doubt using their growing home equity to finance this splurge).
Reserve Bank Governor Alan Bollard said in lifting the cash rate last week that the bank would be looking at other methods of controlling house prices (this study has been ongoing now for over 18 months) and yesterday NZ Finance Minister, Michael Cullen reappeared to again suggest that the government would be looking at other ways of controlling the boom without loading higher interest costs on business and pushing the Kiwi dollar higher, which hurts exporters.
Mr Cullen told a business audience that “there remains a real risk to our economy from the way our domestic and external sectors are out of step. When interest rates go up, our export sector suffers much of the burden.
“Clearly one of our challenges is to find more effective tools to manage inflationary pressure,” Cullen said.
Fourth quarter growth figures for the NZ economy are due on March 30. Economists say there’s every chance the economy grew at a rate of one per cent in the closing months of 2006. They will not tell the fullstory; the pace seems to have picked up in January and February, like here in Australia.
Unemployment is down to 3.7 percent in the fourth quarter but wages are growing strongly at more than three per cent last year.
Statistics NZ reported yesterday that 12 of the 24 retail categories surveyed reported higher sales in January. Car dealers and department stores had the biggest rises, while petrol prices fell.
Excluding sales through auto dealers, workshops and gasoline outlets, ‘core’ retail spending rose 1 per cent from December when they were unchanged
NZ consumer confidence rose to a 17-month high in mid-February. Andso is Australian consumer confidence which yesterday jumped sharply (See below).
