RTTNews - Tuesday, Governor of the Reserve Bank of New Zealand, Alan Bollard said the economy is likely to start recovering earlier than other nations. In an address to the Hawke's Bay Chamber of Commerce, Bollard said early signs of global recovery have now emerged.
New Zealand looks likely to start recovering ahead of the pack, he said.
Some forms of recovery is now on the horizon. Though it won't be easy, it offers a chance to get New Zealand on to a more economically sustainable track, he noted.
Limited scope for additional government spending and the onus on households to constrain their expenditure and repair their balance sheets indicate that the New Zealand recovery is likely to be gradual and fragile by historical standards. But, he expects it to be somewhat stronger than those recoveries of developed trading partners.
According to Bollard, what is needed is for the New Zealand dollar to be persistently weak over the coming years, to encourage the needed business investment to be export-oriented and supportive of improvement in New Zealand's external liability position.
He added that Over coming quarters, it may be the case that the exchange rate will be corrected to weak levels if the financial markets reappraise its appropriate level in light of our imbalances relative to our trading partners, and the outlook for those imbalances given the fundamentals.
But, he said history showed that the financial markets cannot necessarily be relied upon to focus on New Zealand's case relative to other economies in a timely and finely-tuned way, and price the New Zealand dollar accordingly.
In the next phase of recovery in financial market confidence and return of risk-seeking, he hopes the markets to be more discriminating about New Zealand. Meanwhile, the burden is even greater to shift domestic savings behavior in the right direction.
For comments and feedback: contact firstname.lastname@example.org