Reserve Bank of New Zealand Bulletin articles – March 2007
All articles are in Adobe Acrobat PDF format. You can download the free Acrobat PDF reader from the Adobe website.
Editor’s Note (PDF 53KB)
This article presents a detailed comparison of price changes for non-tradable and tradable items in the CPI across Australia and New Zealand. The main result is that relative price movements in Australia and New Zealand are highly correlated in the medium term, although not in the very short term. Sectors that have had large price increases in New Zealand have tended to have large price increases in Australia, and sectors that have had small price increases in New Zealand have tended to have small price increases in Australia. In both countries, price increases for non-tradable items have generally outpaced price increases for tradable items. However, the article finds that non-tradable price increases have not been noticeably higher in New Zealand than in Australia. Moreover, price changes have been high relative to Australia’s in several of New Zealand’s ‘tradable’ sectors since June 1998, particularly for non-food retail items.
New Zealand’s medium-to-longer-run growth prospects and general standard of living critically depend upon its labour productivity performance. Relative to most OECD countries, the level of labour productivity in New Zealand is low and, when measured as GDP per worker, the historic growth performance has also been relatively poor. The apparently poor performance is a key concern for policymakers and has attracted much research attention. The focus has been to understand why performance has not been better, given that cross-country indicators of New Zealand’s economic environment broadly suggest New Zealand should be amongst the highest performers, not a laggard. In this article, the research is synthesised and recent official productivity data released by Statistics New Zealand (SNZ) is analysed. A key conclusion is that the historic productivity performance has in fact been significantly better than is suggested by looking at the aggregate measures of productivity in isolation, and there is some cause for optimism that this will continue.
This article sets out theoretical and empirical evidence on the impact of fiscal policy on the business cycle. Our analysis suggests that fiscal policy has a significant influence on cyclical conditions in New Zealand. Simple measures of the stance of fiscal policy, such as the Treasury’s measure of fiscal impulse, are useful, but the details of fiscal initiatives also need to be analysed to determine macroeconomic impact. For example, tax changes can have very different effects: tax cuts designed to spur savings could be mildly contractionary, while company tax cuts will tend to be expansionary. The significance of fiscal changes for monetary policy also depends partly on other factors driving the business cycle.
Emerging Asia and global inflation (PDF 138KB)
The integration of emerging markets such as China into the global economy has had a profound effect on the inflation process in advanced economies. This article examines the relationship between the integration of emerging Asia into the global economy and the inflation process in New Zealand, highlighting both the downward and upward pressures on inflation emanating from the region. Monetary policymakers appear to have benefited from the protracted deflationary impulse from lower import prices, which may have made the achievement of domestic inflation objectives easier to achieve than might otherwise have been the case. However, this positive supply shock has more recently been matched by the headwinds of higher commodity prices.
Economic and financial chronology 2006 (PDF 77KB)
This chronology documents key economic and financial events that occurred during 2006.
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.