BNZ Weekly Overview

Welcome to the May 7 2009 issue of the BNZ Weekly Overview.

This morning we learnt that although employment fell 24,000 in the March quarter the unemployment rate only rose to 5% from 4.7%. The rate has averaged 4.8% over the past decade. But interestingly, we also learnt today that in Australia employment jumped 27,000 in the month of April. Their retail sales numbers have also been strong and in other countries economic data releases have been printing on the better than expected side.

Although eventually world growth will turn up, all that is happening for now is shrinkage offshore is diminishing. But that is enough for the financial markets to trade on as they look at what will come and not what is or has been. This explains why we have seen a near 30% gain in the US sharemarket since early March, a ten cent jump in the NZD since back then, and upward pressure on wholesale fixed interest rates over the past week even though the RBNZ cut its cash rate 0.5% last week.

The situation offshore remains perilous and the road ahead is going to throw up major volatility in asset prices and confidence in what lies ahead. But in the absence of a resumption of full fears about the Great Depression scenario reasserting itself it sees a long shot to expect any substantial retracement in either our currency or fixed borrowing costs.

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