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The IMF Executive Board Concludes the 2018 Article IV Consultation with New Zealand
July 3, 2018
On June 25, 2018, the Executive Board of the IMF
The International Monetary Fund (IMF) has concluded the consultation under Article IV
[1]
with New Zealand.
Since 2011, New Zealand has experienced an economic expansion marked by
momentum. Reconstruction expenditures after the 2011 and 2016 earthquakes were
an important catalyst, but the expansion was also supported by
accommodative monetary policy, a wave of net migration, improved services
exports (especially tourism) and the strengthening of the terms of trade.
GDP growth in 2017 at 3% was close to trend, bouncing back in the middle of the year
meteorological factors and other temporary factors decreased but
below growth rates of about 4% in 2014-16. Unemployment
rate dropped to near the natural unemployment rate of about 4.5
percent by the end of 2017, as strong job growth has absorbed
increase induced by labor force migration. While this last too
pressures contained in wages, overall inflation remained in the reserve
The goal of the Bank of New Zealand (RBNZ) is 1 to 3%. After a rebound
in early 2017, mainly due to rising commodity prices, headline
Inflation slowed during the rest of the year, reflecting in
downward pressure on prices of imported goods and services.
The current account deficit remained generally lower than its longer term
average in the expansion. It is estimated that it is moderately lower than
fundamental level, with a moderately overvalued exchange rate. The Internet
foreign debt / GDP ratio, among the highest in the advanced economies,
has been globally stable. Commercial banks continue to hold strong capital
and liquidity buffers. Slower credit and stronger deposit growth
helped to reduce reliance on extraterritorial market financing.
The housing market is getting colder and household credit growth has slowed.
The cooling seems to reflect the macroprudential policy of the RBNZ
intervention at the end of 2016, and the foreign demand may be lower
self-correction in response to the decline in affordability. Together with
tighter credit standards, moderation in household credit growth
in turn, broadly in line with nominal income growth. Cleaning
The debt-to-income ratio, while still high, has stabilized around 168%.
Monetary policy remains accommodative, the key rate of the RBNZ being maintained
1.75% since the end of 2016. The countercyclical fiscal stance
the future will balance the macroeconomic policy mix and the fiscal position
should further strengthen, with net debt below 20%
of GDP by 2022 / 23. Macroprudential policies have helped to reduce
risks related to financial stability and should continue to mitigate risks
of high household debt, even with a very slight easing of the loan-to-value ratio
ratio restrictions early in 2018.
The election of a new government led to new macrostructural policies.
There will be a new system of tax credits to promote research and
development (R & D). A three-year increase in the minimum wage
NZ $ 20.00 will be introduced, giving New Zealand second place
ratio of minimum-median wages in the OECD. Students of higher education
will now receive a year of government funding. Finally, a billion dollars New Zealand
per year, the Provincial Growth Fund will support regional development
the next three years.
Evaluation of the Executive Council
[2]
Directors commended the authorities for their macroeconomic prudence
policies leading to strong and continued economic growth in New Zealand. While
the outlook remains favorable and short-term risks are broadly balanced,
medium-term risks are on the downside, including
global financial conditions tighter than expected and growing protectionism
policies in other countries. In this context, the administrators encouraged
pursue the implementation of sound policies and reforms aimed at
growth.
Directors agreed that the current parameters of macroeconomic policy
appropriate and welcomed the authorities' willingness to adjust the policy
mix if necessary. They considered that the direction of monetary policy was sufficiently
expansionist to meet current inflation, below target and reduce risk
at the request of the overvaluation of the currency. The directors agreed that the strong
budget position provides space to meet robustness needs
population growth, while the pace of debt reduction envisaged
The budget for the 2018/19 financial year is sufficiently ambitious. They encouraged stronger use
structural revenues to increase infrastructure spending, human capital
development and other public services that could increase potential output.
Directors noted that macroprudential policies have helped reduce
risks to financial stability and should continue to mitigate risks
high household debt. Balance sheets of banks and households have become more
resilient with a lower share of loans with high loan-to-value ratios
(LVR). Household debt is still high, so administrators generally do not have
further relaxation of RVV restrictions, if any, in the short term.
Directors welcomed the revision of the law on reservations. Regarding the first phase
of the examination, they encouraged the maintenance of the goal of employment
the updated framework is legislated and fully implemented. The directors saw
The second phase of the review, focused on financial stability and other policies,
as an opportunity to better define the mandate and objectives of
Reserve New Zealand in this area. They encouraged the authorities
focus on priority areas requiring reform, such as
the macroprudential toolbox and the monitoring pillar proposed in the
Financial Sector Assessment Program.
Directors recognized that the ambitious housing policy agenda was centered on
Strengthening the supply and reducing tax distortions will help restore
affordability of housing on a large scale. They emphasized that the success of
the agenda will depend on the well-coordinated progress of KiwiBuild
urban growth program in the public sector. A lot
Directors noted the proposed ban on residential real estate purchases
non-residents, which is assessed as a management measure of
the institutional vision of the Fund and encouraged the authorities to reconsider
measurement. They felt that this measure would have little chance of improving
housing affordability, while the broad housing policy agenda, though
implemented, would probably solve most of the potential problems associated with
with foreign buyers on a non-discriminatory basis. A number of directors,
however, given the merit of taking into account the social and political economy
evaluation considerations, or do not think that the proposed ban
would have a significant impact on the balance of payments.
Directors welcome the government's structural policy agenda
support productive, sustainable and inclusive growth. They noted that
a tax credit for R & D, if it is well designed, could be an effective instrument
support innovation in the business sector, while tax reform could play
an important role in transferring incentives to broader activities
investment. Directors welcomed the authorities' continued commitment to
multilateral trade integration.
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|
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|
(Annual percentage change, unless otherwise indicated) |
|||||||||||
|
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|
|
East. |
Projections |
||||||||||
|
NATIONAL ACCOUNTS |
|||||||||||
|
Real GDP (production) |
2.2 |
3.6 |
3.5 |
4.0 |
2.9 |
3.1 |
3.2 |
3.1 |
2.9 |
2.7 |
2.6 |
|
Real GDP (Expenditures) |
2.2 |
3.2 |
4.2 |
4.2 |
3.0 |
3.2 |
3.2 |
3.1 |
2.9 |
2.7 |
2.6 |
|
Domestic Demand |
3.7 |
4.5 |
3.2 |
4.7 |
4.0 |
4,9 |
3.1 |
3.1 |
2.8 |
2.6 |
2.4 |
|
Private consumption |
3.5 |
3.2 |
3.8 |
5.0 |
4.5 |
3.8 |
3.1 |
3.0 |
2.7 |
2.4 |
2.4 |
|
Public consumption |
1.4 |
3.3 |
2.7 |
1.7 |
4.7 |
3.9 |
1.8 |
1.5 |
1.5 |
1.5 |
1.5 |
|
Investment |
6,6 |
11.2 |
2.8 |
6.3 |
3.3 |
4.3 |
4.0 |
4.3 |
4.1 |
3.6 |
3.1 |
|
Public |
7.0 |
6.5 |
6.1 |
-2.9 |
-0.3 |
9.0 |
2.0 |
1.5 |
1.5 |
1.2 |
1.2 |
|
Private |
8.2 |
10.6 |
3.7 |
9.7 |
4.4 |
3.7 |
4.6 |
5.1 |
4,9 |
4.2 |
3.6 |
|
Private Company |
3.9 |
11.1 |
2.5 |
8.6 |
6.4 |
4.8 |
5.2 |
5.1 |
4.8 |
4.2 |
3.8 |
|
Housing |
17.7 |
9.8 |
6.0 |
11.8 |
0.6 |
1.4 |
3.3 |
5.3 |
5.2 |
4.2 |
3.3 |
|
Stocks (contribution to growth, percentage) |
-0.2 |
0.4 |
-0.3 |
0.0 |
0.0 |
-0.2 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
|
Net exports (contribution to growth, percentage) |
-1.6 |
-1.6 |
0.8 |
-0.6 |
-1,4 |
-1,5 |
-0.1 |
-0.2 |
-0.1 |
-0.1 |
0.0 |
|
Real gross domestic income |
4.4 |
5.2 |
2.0 |
4.6 |
4.3 |
4.5 |
3.2 |
3.1 |
2.9 |
2.7 |
2.7 |
|
Investment (percentage of GDP) |
21.9 |
22.7 |
23.1 |
23.7 |
23.8 |
24.3 |
24.6 |
25.0 |
25.4 |
25.6 |
25.8 |
|
Public |
5.6 |
5.7 |
5.9 |
5.5 |
5.3 |
5.6 |
5.6 |
5.5 |
5.4 |
5.4 |
5.3 |
|
Private |
16.3 |
17.1 |
17.2 |
18.2 |
18.5 |
18.7 |
19.1 |
19.5 |
20.0 |
20.3 |
20.5 |
|
Savings (gross, percentage of GDP) |
19.0 |
19.5 |
20.0 |
21.4 |
21.0 |
21.6 |
21.8 |
22.0 |
22.4 |
22.6 |
22.8 |
|
Public |
3.3 |
4.0 |
4.1 |
1.2 |
1.4 |
0.8 |
0.9 |
1.3 |
1.6 |
2.0 |
2.0 |
|
Private |
15.8 |
15.4 |
16.1 |
20.2 |
19.6 |
20.8 |
20.8 |
20.7 |
20.8 |
20.6 |
20.8 |
|
Potential output |
2.4 |
2.6 |
2.8 |
3.0 |
3.0 |
3.0 |
3.0 |
2.9 |
2.8 |
2.7 |
2.7 |
|
Production gap (percentage of potential) |
-2,4 |
-1.6 |
-0.9 |
0.1 |
0.0 |
0.1 |
0.3 |
0.4 |
0.6 |
0.5 |
0.4 |
|
LABOR MARKET |
|||||||||||
|
Employment |
1.5 |
3.5 |
2.2 |
4.6 |
4.1 |
2.8 |
1.8 |
1.4 |
1.3 |
1.3 |
1.4 |
|
Unemployment (percentage of the labor force) |
5.8 |
5.4 |
5.4 |
5.1 |
4.7 |
4.5 |
4.5 |
4.4 |
4.3 |
4.3 |
4.4 |
|
Wages (nominal percentage change) |
2.4 |
2.5 |
2.3 |
1.9 |
2.1 |
2.9 |
2.1 |
2.5 |
2.5 |
2.4 |
2.6 |
|
PRICE |
|||||||||||
|
Index of terms of sale (goods,% variation) |
8.5 |
5.6 |
-5.0 |
1.2 |
6,6 |
2.1 |
-0.6 |
0.1 |
0.0 |
0.1 |
0.5 |
|
Consumer price (average,% change) |
1.1 |
1.2 |
0.3 |
0.6 |
1.9 |
1.4 |
1.7 |
1.9 |
2.0 |
2.0 |
2.0 |
|
GDP deflator (avg,% change) |
3.2 |
1.9 |
0.8 |
1.9 |
3.6 |
2.7 |
2.0 |
2.0 |
2.0 |
2.1 |
2.0 |
|
MACRO-FINANCIAL |
|||||||||||
|
Official exchange rate (police rate, percentage, average) |
2.5 |
3.1 |
3.2 |
2.2 |
1.8 |
1.8 |
1.8 |
2.1 |
2.4 |
2.9 |
3.0 |
|
Credit to the private sector (percentage change) |
5.1 |
4.5 |
8.4 |
7.3 |
4,9 |
5.1 |
5.3 |
5.1 |
5.0 |
5.0 |
4.7 |
|
Housing prices (% change, avg) |
9.0 |
6.5 |
11.6 |
13.0 |
6.4 |
4.5 |
4.5 |
4.2 |
4.0 |
4.0 |
4.0 |
|
Interest payments (percentage of disposable income) |
8.4 |
9.0 |
9.3 |
8.5 |
8.4 |
8.6 |
8.8 |
9.1 |
9.3 |
9.5 |
9.8 |
|
Home savings (percentage of disposable income) |
3.3 |
2.1 |
2.0 |
2.2 |
2.4 |
2.6 |
2.8 |
3.0 |
3.1 |
3.3 |
3.5 |
|
Household debt (percentage of disposable income) |
151 |
155 |
161 |
167 |
168 |
166 |
165 |
163 |
161 |
160 |
159 |
|
GENERAL GOVERNMENT (as a percentage of GDP) 1 / |
|||||||||||
|
Income |
37.3 |
37.2 |
37.7 |
37.6 |
37.2 |
37.0 |
37.1 |
37.2 |
37.2 |
37.3 |
37.3 |
|
Expenditure |
38.5 |
37.7 |
37.3 |
36.4 |
35.8 |
36.2 |
36.1 |
35.9 |
35.6 |
35.3 |
35.3 |
|
Net loan |
-1,3 |
-0,5 |
0.3 |
1.2 |
1.4 |
0.8 |
0.9 |
1.3 |
1.6 |
2.0 |
2.0 |
|
Operating balance |
0.2 |
1.0 |
1.9 |
2.7 |
3.0 |
2.9 |
2.9 |
3.0 |
3.1 |
3.3 |
3.3 |
|
Balance adjusted for cyclical changes |
0.4 |
0.7 |
1.2 |
1.9 |
2.3 |
1.8 |
1.8 |
2.1 |
2.3 |
2.7 |
2.7 |
|
Gross debt |
34.6 |
34.2 |
34.3 |
33.5 |
31.7 |
30.0 |
29.0 |
28.1 |
27.6 |
26.2 |
23.0 |
|
Net debt |
11.0 |
10.4 |
9.8 |
9.1 |
8.6 |
10.0 |
11.0 |
10.8 |
10.2 |
8.1 |
4,9 |
|
Net value |
87.5 |
89.1 |
90.7 |
93.0 |
86.0 |
75.9 |
74.7 |
73.4 |
71.5 |
71.2 |
72.1 |
|
BALANCE OF PAYMENTS |
|||||||||||
|
Balance of payments (percentage of GDP) |
-3.2 |
-3.2 |
-3.1 |
-2,3 |
-2.7 |
-2,6 |
-2.9 |
-3.0 |
-3.0 |
-3.0 |
-3.0 |
|
Export volume |
0.8 |
3.1 |
7.0 |
1.5 |
2.6 |
2.7 |
3.9 |
4.0 |
4.3 |
4.3 |
4.1 |
|
Import volume |
6.2 |
7.9 |
3.8 |
3.3 |
6,6 |
6,7 |
3.6 |
3.8 |
3.8 |
3.7 |
3.5 |
|
Net international position (as a percentage of GDP) |
-64.4 |
-65.3 |
-61.3 |
-59.3 |
-54.8 |
-54.3 |
-54.5 |
-54.8 |
-55.2 |
-55.7 |
-56.2 |
|
Gross official reserves (in millions of US dollars) |
16.5 |
15.8 |
14.3 |
18.2 |
20.3 |
… |
… |
… |
… |
… |
… |
|
MEMORY POINTS |
|||||||||||
|
Nominal GDP (bn NZ $) |
228 |
241 |
251 |
266 |
283 |
300 |
316 |
332 |
349 |
366 |
383 |
|
Percentage change |
5.5 |
5.5 |
4.4 |
6.0 |
6,6 |
5.9 |
5.2 |
5.2 |
5.0 |
4.8 |
4.7 |
|
Nominal GDP per capita (US $) |
41,777 |
43,876 |
39,050 |
41,591 |
44,508 |
46,340 |
48,413 |
50,598 |
52,854 |
54,985 |
|
|
Real gross disposable national income per capita (NZ $) |
46,491 |
47,896 |
48,204 |
49,851 |
50,560 |
51,808 |
52,176 |
52,741 |
53,365 |
53,916 |
54,538 |
|
Percentage change |
3.2 |
3.0 |
0.6 |
3.4 |
1.4 |
2.5 |
0.7 |
1.1 |
1.2 |
1.0 |
1.2 |
|
Population (in millions) |
4.4 |
4.5 |
4.6 |
4.6 |
4.7 |
4.8 |
4,9 |
5.0 |
5.1 |
5.2 |
5.3 |
|
US $ / NZ $ (medium level) |
0821 |
0831 |
0.700 |
0.697 |
0711 |
… |
… |
… |
… |
… |
… |
|
Nominal effective exchange rate |
112.3 |
116.6 |
111.2 |
112.0 |
113.3 |
… |
… |
… |
… |
… |
… |
|
Real effective exchange rate |
111.5 |
115.2 |
109.3 |
109.6 |
111.0 |
… |
… |
… |
… |
… |
… |
|
Sources: Authorities data and IMF staff estimates |
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|
1 / Calendar year. |
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[1]
According to Article IV of the IMF's Articles of Agreement, the IMF
Bilateral discussions with members, usually every year. Staff
the team visits the country, collects economic and financial data
information, and discusses with officials of the economy
developments and policies. Back at headquarters, the staff
prepare a report which forms the basis of the discussion by the
Executive counsel.
[2]
At the end of the discussion, the Director General, as
Chairman of the Board, summarizes the views of the Directors,
and this summary is transmitted to the authorities of the country. A
explanation of all the qualifiers used in the summaries can be found
right here:
http://www.imf.org/external/np/sec/misc/qualifiers.htm
.
IMF Communications Department
RELATIONS WITH THE MEDIA
PRESS: Ting Yan, [email protected]
Telephone: +1 202 623-7100 Email: [email protected]
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