Reserve Bank of New Zealand Bulletin articles – June 2005
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Editor’s Note (PDF 32KB)
By Alan Boaden
This article discusses the various changes to the currency and cash distribution procedures that have occurred in recent years, together with the more recent decisions to modernise the ‘silver’ coins. Polymer notes, which were introduced in 1999, are found to have proven very durable and cost-effective compared with the older paper notes. The Reserve Bank’s move to become a wholesale supplier of currency (ie no longer participating in the daily distribution of cash to the registered banks) has significantly reduced costs in this area. The article explains the recent decision to opt for smaller and lighter ‘silver’ coins and to withdraw the 5 cent coin from circulation, noting that the new coins are expected to bring significant benefits for the public.
Savings and the household balance sheet (PDF 915KB)
By Khoon Goh
The past decade and a half has seen a consistent decline in the household savings rate in New Zealand. This trend is not isolated to New Zealand, but is also occurring in other OECD countries. In addition, household indebtedness has risen at a faster rate than in other OECD countries. It is difficult to know how much further the savings rate will fall and household indebtedness will increase, but an adjustment in behaviour is likely at some point. The low household savings rate has contributed to an ongoing reliance on foreign savings. The banking system appears to manage the risks associated with using foreign savings well. However, as New Zealand’s reliance on foreign savings increases, the economy at large potentially becomes more exposed to changes in international investor preferences, while households may become more sensitive to changes in interest rates, the labour market or house prices.
Developments in the New Zealand corporate sector (PDF 549KB)
By Khoon Goh
This article examines recent trends in the New Zealand corporate sector by analysing data from various sources. The corporate sector has enjoyed increased profitability over the past few years on the back of strong economic growth. While the absolute level of debt has also been rising in the past few years, the overall balance sheet position has improved. The recent strong investment growth appears to have been funded out of retained earnings or equity raisings rather than via debt. This has allowed businesses to strengthen their balance sheets while investing for future growth at the same time. Margins started to come under pressure towards the end of 2004. Looking forward, rising input and labour costs, and higher cost for some capital items may lower profitability over the coming year. At this stage, it appears that businesses in the non-tradables sector are more likely to pass on increased costs on to customers. Businesses in the tradables sector have more limited pricing power.
Overview of the New Zealand retail sector (PDF 600KB)
By Hannah Kite
This article provides an overview of the retail sector over the past five years. Strong sales growth across all store types has been a key feature of the retail sector over the period. The scale of the retail sector has also been expanding, with a significant increase in the number of new stores, and a tendency toward larger store sizes as operators seek competitive advantages of increased buying power and other scale economies. Low price inflation, particularly for stores that sell imported goods, has been another feature of the retail sector; low or negative inflation in the sector has been driven by the rising New Zealand dollar, and a fall in world prices for manufactured consumption goods. Productivity growth within the retail sector appears to have been lower than in other parts of the economy, but may be increasing over time. Profit margins within the sector have lifted slightly over this period but appear to have been constrained by strong competition and further increases in capacity within the sector.
An address by Dr Alan Bollard, Governor of the Reserve Bank of New Zealand to the Australasian Institute of Banking and Finance on 23 March 2005. Alternatively, link to the html version of this speech by Alan Bollard.
The views expressed are those of individual authors and do not necessarily reflect official positions of the Reserve Bank of New Zealand. Articles published in this Bulletin may not be wholly or substantially reproduced without the permission of the Reserve Bank of New Zealand. Data, brief extracts from articles, and other material appearing in the Bulletin, may be used without restriction provided due acknowledgement is made of the source.
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