BNZ Weekly Overview, 24 March 2011

Welcome to the March 24 issue of the BNZ Weekly Overview.

This morning we learnt that the NZ economy avoided recession by growing a paltry 0.2% in the December quarter ? not that the result really matters because the data are out of date. Also things were actually worse than the number implies because a lot of products produced in the quarter simply went into inventories and taking that stocks build-up out the economy actually shrank between 0.5% and 1.0%.

More recent data show flat activity continuing in the economy apart from some signs of life in the Auckland housing market, job advertising, forestry, information technology (70% job ad growth on a year ago) and spending by farmers. In this week?s Overview we list the factors we expect will eventually dominate the negative short term impact of the Christchurch effect and start propelling the economy forward into what we currently think will be a relatively strong 2012 ? subject to restraint of course from a wide variety of factors such as tightening fiscal policy, rising energy and materials prices, and simple 100% uncertainty about when householders will switch from cutting debt levels to spending a bit more.

But too many times we forecasters have predicted strength which hasn?t eventuated. So personally if I were running a business I would feel proud that I am still around after almost three and a half years of pain, I?d still be cutting debt by taking advantage of the unexpected 0.5% cut in the cash rate, and I?d be keeping my inventories low until I saw three months of higher customer numbers. But I would also be focussing on staff training, keeping an eye out for good new people, and investigating who to link up with to source staff from overseas. One of our key views is that the economy is going to run into some structural labour shortages from the latter part of 2012 and with labour force growth for the next 15 years projected near 11% compared with 29% for the past 15 years if you?re not considering migrant sourcing you are going to have a problem.

At www.tonyalexander.co.nz this week the new material you will find includes a new monthly publication looking at the state of the NZ labour market, the second paper in our series looking at NZ economic deficiencies, a paper about the role of migrants in driving house prices (or not), and a few comments on China sourced from a conference I attended in Melbourne last week. Enjoy. If you wish to give feedback on the website flick me a reply email as at this stage I have disabled the Comments facility on the site.

For your guide, one of the great fund raising efforts occurring offshore to help those affected by the Christchurch earthquake is a giveaway of 150 free room nights by Sunshine Coast resort operators. If you would like to bid at the auction of these rooms then click on the following link, log in and make an offer or buy outright. http://www.auction4christchurch.com

Full report: WOMch24.pdf

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