The New Zealand Treasury says the country’s nasty recession is probably over, with the economy likely to expand in the current quarter ending September 30.
In its August economic indicators report, published yesterday the Treasury said in the report on its website:
“A small decline in real gross domestic product in the second quarter is likely to represent the last quarter of contraction in the current sequence.”
This stronger growth is likely, "due to improved global conditions, higher migration, and increasing confidence."
But "the composition of growth is likely to be unfavourable for the unwinding of imbalances."
Unemployment will continue increasing and "will continue to do so into next year, although peak will be lower than we previously predicted," the department said.
"The overall tone of international data released over the past month was of an improving global outlook.”
Improving China and better growth in Australia seem to be the major factors helping the country.
As well there has been a 50% jump in world milk prices to their highest level in a year (after touching a five year low in July).
New Zealand is the world’s biggest dairy exporter and the price slump was projected to badly damage export income, but now there’s been such a sharp price rise, the impact may not be so bad.
The rise has come despite a strong NZ dollar in recent months.
An example of this was seen in the release yesterday of the latest house sale figures for the country.
These showed the 4th month of rising house prices, principally due to a shortage of suitable housing.
Prices rose 0.7% from July and have gained 1.9% from April’s lows. But they are still almost 8% down on a year ago.
Quotable Value New Zealand Ltd., the government valuation agency, said: “The housing market is strongly driven by confidence and that appears to be returning to the wider market."
As well, NZ consumer optimism is at an 18-month high, according to a Roy Morgan poll; annual immigration growth accelerated to the highest level in more than two years in July and house sales rose 34% from a year earlier.
"GDP figures for the June quarter surprised on the upside, with positive growth recorded in Australia, Germany, France and Japan," the Treasury said.
"Forward looking indicators of manufacturing activity generally increased with some at expansionary levels.
"There are also tentative signs of stabilisation in the US housing market, although risks remain.
"The Chinese economy is playing an important role in supporting global activity and is becoming an increasingly important destination for Australasian exports.
"However, the recovery remains fragile with concerns about how sustainable it will prove once monetary and fiscal stimulus begins to be removed.
"Such doubts impacted on the Chinese share market over August with nervousness spreading to other markets in early September.
"Falling imports, reflecting weak domestic demand, were a key driver of a narrowing in the annual merchandise trade deficit from $3.1 billion in June to $2.5 billion in July.
"The growing importance of China was also apparent in these figures with Chinese demand helping to support exports.
"The value of annual exports to China has grown 61% over the past year with China now New Zealand’s third largest export destination.
"A broad-based increase in business confidence was seen in the National Bank’s Business Outlook survey, with expectations about businesses’ own activity levels increasing to a near five year high.
"Continued rises in the exchange rate over August meant that the New Zealand dollar over July and August was around 21% higher than in the Budget Forecasts, limiting the gains from the recovery in overseas demand.
"There are also signs that domestic spending may be increasing with retail sales volumes recording their first quarterly increase in seven quarters in June.
"Together these factors suggest that imbalances such as the current account deficit and household indebtedness are less likely to unwind significantly.
"Net migration has risen, and is likely to rise further, as departures have fallen.
"Stronger population growth is one factor helping promote a recovery in the housing market, the subject of this month’s special topic, with house prices having grown modestly over much of 2009.
"It is also one factor, alongside the improved global outlook and higher confidence, which will lead us to revise up our economic forecasts for the Half Year Update.
"However, the composition of growth may mean that stronger growth will prove unsustainable.
"In addition, with tax revenue behind forecast, a stronger economic outlook may have a more limited impact on the fiscal position."
