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Recent economic performance.

The New Zealand economy has performed well since bouncing back from the effects of 1997's Asian crisis. Growth rates were above 5 per cent per year through 1999 and early 2000 and, after a brief pause in 2000, continued to hold up reasonably well last year (Figure 1). The country has been riding on a terms of trade boom, as the prices of its major exports were out of line with general global commodity prices until late in 2001 (Figure 2). It has also enjoyed the rare combination of having a weak exchange rate at the same time as high export prices, so prices in local-currency terms were extraordinarily favourable. A second key driver of activity has been reasonable growth in export volumes, although manufactured export growth has been less impressive. Agricultural exports benefited from an excellent growing season, while the low New Zealand dollar gave a significant boost to tourism, at least until September last year. Since then, however, export prices and volumes have fallen significantly. But, in the mean time, income gains in the rural sector had begun to flow through to the rest of the economy, and this fortuitous timing has ensured that robust domestic demand is now cushioning the post-September external slump.

The pause in growth in 2000 reflected several opposing influences, with the weakening coming mainly from the household side (Figure 3). On the one hand, private consumption, after growing at over 4 per cent the previous year, started to show signs of slowing as real disposable incomes were hit by the impact of rising inflation and, in particular, by higher energy prices. Residential investment declined sharply, reflecting in part higher borrowing costs, as monetary policy was progressively tightened during the year. On the other hand, exports continued to be a driving force of economic expansion, benefiting from rising commodity prices and from the earlier depreciation of the New Zealand dollar. In addition, business fixed investment was accelerating, as the economy started to encounter capacity constraints.

The pace of growth strengthened during 2001

However, the slowdown recorded around the turn of that year proved temporary, and over the course of 2001 economic activity in New Zealand gradually strengthened, in marked contrast with the increasingly serious cyclical downturn in most other OECD countries. Both consumer demand and exports contributed significantly to this resilient performance, although the relative weight of these two components gradually shifted toward the former during the year (Table 1). On the other hand, the contribution of total capital formation to demand growth was modest: business fixed investment continued to grow, but at a slower and more volatile pace than in 2000 reflecting in part the uncertainty of the global outlook, while residential investment virtually stagnated at low levels for most of the year, showing signs of a recovery only in the fourth quarter. Overall, GDP grew 2.4 per cent in 2001.

Unlike the upswings of the mid-1990s and 1999-2000, when output expansion was relatively balanced across sectors, in 2001 growth was concentrated in the primary sector and in services, while the industrial sector experienced volatile and on average negative output growth. In the case of construction, the output contraction reflected to a large extent the depressed state of the housing market. The utilities sector suffered from the severe but temporary effect of the winter 2001 electricity crisis, caused by the lowest water inflows to the hydroelectricity system in 71 years (see Chapter IV and Annex III). Since the crisis resulted in sharp increases in electricity prices for commercial users, it also had a negative, albeit temporary, effect on manufacturing output, as several firms slowed production or advanced maintenance work to cut their energy bills. In addition, manufacturing industries seem to have felt the dampening influence of slowing world demand. By contrast, all service sectors continued to record robust growth for most of the year, reflecting buoyant consumer demand. In primary sectors, activity remained at high levels, but slowed during the year due to less favourable weather conditions.

Export prices and tourism underpinned growth during most of the year

As was the case in 2000, a substantial push to economic activity came from exports, which benefited from a high level of commodity export prices and a depreciated exchange rate. Although largely stable in 2001 and in early 2002, the New Zealand dollar remained at levels about 40 per cent lower than its peak in early 1997 against the US dollar and about 30 per cent lower in trade-weighted terms. At the same time, while most global commodity prices were weak in 2001, New Zealand's were relatively strong (Table 2). Several underlying factors were at play. The BSE scare and Britain's foot-and-mouth outbreak boosted prices of New Zealand produced lamb and beef, and meat prices in general were supported by strong demand from Asian countries. In addition, dairy prices benefited from strong demand and reductions in agricultural subsidies in Europe. Consequently, the terms of trade rose to a ten-year high over the course of the year. When combined with a weak exchange rate, export prices in local currency terms were extraordinarily high for most of the year, and have remained favourable even after a sharp price decline in late 2001. The dairy industry was the primary engine of export growth, partly because it is the biggest single exporter, but also because price increases there were amongst the most substantial. In value terms, dairy exports rose 40 per cent in 2001, accounting for just under half of all commodity export growth.

A boom in tourism was the main component of strong service exports. In the first eight months of 2001, visitor arrivals were 11.7 per cent higher than in the previous year. Arrivals plunged after 11 September, but quickly returned to a level only slightly lower than a year earlier before moving on to set new record highs in early 2002. Unfortunately, however, the southern summer is the high season for the industry, which, therefore, missed out on the full extent of the significant income gains that it had been planning for. The decline was across-the-board, with arrivals from all countries falling significantly, but by far the biggest decline was Japanese tourists who followed their government's advice not to travel. Merchandise exports had already started to decelerate before September in volume terms, reflecting the effects of slowing world demand and probably also the gradually dwindling effects of the past exchange-rate depreciation. Their year-on-year growth in the first three quarters of 2001(3.7 per c ent) was substantially lower than that achieved in 2000, particularly for manufactures. Export volumes continued to slow down in the fourth quarter, led by a retrenchment of dairy exports.

Rising employment and export sector incomes boosted consumer spending

As the external sector gradually slowed during the year, a growing contribution to the economy's resilient performance came from private consumption, which in 2001 increased at an annual rate of about 2 1/4 per cent. Throughout the year consumption expenditure was supported by the expansion of disposable income. Employment continued to grow at a strong pace, and wage increases, at around 3 1/2 per cent, outpaced current inflation, recovering some of the ground lost in real terms during the previous year. At the same time, households benefited from high income levels in the primary export sector. Indeed, retail sales grew especially quickly in farming regions. Lower interest rates supported spending on consumer durables, which accelerated in the latter part of the year, but the strong growth in car purchases in the fourth quarter (reflected in imports) was due in good part to temporary factors (the expected introduction of stricter safety standards on imported used vehicles). Consumer confidence, which had alr eady recovered strongly in the last quarter of 2000, remained at high levels until about mid-2001. It declined in advance of the September 2001 terrorist attacks, but the impact of the latter seems to have been milder and more short-lived than in most other countries. By early 2002 the index was back at high levels, consistent with the signs of robust consumer spending coming from retail sales and other short-term indicators.

Although supported by a broad set of favourable conditions, the growth of consumer spending proceeded at a considerably more moderate pace than in 1999 and in the mid-1990s boom, when it had exceeded 4 per cent. House-holds' propensity to spend was probably restrained in part by balance-sheet considerations. Over the past few years, their debt levels have continued to rise, while their total wealth, about 60 per cent of which is represented by housing, was stagnant, with house prices virtually unchanged since 1998. Thus, households seem to have preferred to save part of the income gains from the favourable terms of trade, perceived as at least in part temporary. This behaviour may also have reflected a precautionary motive, given the uncertainties connected with the global situation.

Investment's contribution to growth was modest

In contrast to consumption, investment growth was relatively subdued. After recording strong increases in 2000, business fixed investment expanded more moderately in 2001 (Figure 4). Its considerable volatility during the year makes trends difficult to read, but its level remained relatively high and held up surprisingly well also in the latter part of the year. While uncertainty increased enormously through the fourth quarter, and business confidence fell, that does not appear to have led to an economy-wide postponement of investment plans. In part this may be because firms expected the global slowdown to be short-lived, but probably reflects also lower interest rates and sound company balance sheets. In any event, both business confidence and investment intentions have recovered their pre-September levels. With indicators of capacity utilisation still relatively high and no investment overhang from previous years, business capital formation seems poised to rise strongly in 2002. Residential investment rema ined very weak in 2001, as it unwound the effects of the over-exuberance of the mid-1990s (Figure 4). However, after bottoming around mid-year, it has since begun to turn. Strong employment growth, lower interest rates and a significant turnaround in migration flows are all contributing. Rising house sales and shorter average time to sell indicate the market is picking up, and this started to show up in homebuilding towards the end of 2001 and, to a limited extent, in house prices in early 2002. Both are likely to strengthen in coming months. Finally, the contribution of changes in inventories to growth was virtually nil in 2001. As their level seems consistent with the current phase of the business cycle, no major adjustments are expected in 2002.

The labour market was tight

After growing strongly in 1999 and 2000, employment accelerated further in 2001, to an annual growth rate of 2 1/2 per cent (Table 3 and Figure 5). Last year's expansion was remarkably broad-based across contract types (full-time and part-time), gender, age and ethnic groups, and sectors of the economy. Most industries recorded an increase in numbers employed, although the largest occurred in agriculture and the public sector. Moreover, the increase in total employment derived both from a decline in the ranks of the unemployed and from new labour-market entrants. The unemployment rate declined to an average of 5 1/4 per cent, from 6 per cent in 2000. This was the lowest level since the late 1980s, even lower than that reached at the peak of the protracted economic expansion of the mid-1990s. At the same time, the participation rate increased by 1 percentage point, to 66.4 per cent. Although the current increase in participation is partly cyclical, in the case of the female population this rise is superimposed on a clear uptrend observed since the early 1990s.

The global slowdown throughout last year, combined with a local economy that was doing reasonably well, was probably the underlying factor leading to the sharp turnaround in net long-term migration flows, with arrivals beginning to exceed departures. The pace picked up significantly after 11 September. Large numbers of New Zealanders, who may have been considering the idea of returning home some time in the next year, seemed to regard that event as a catalyst. At the same time, departures declined. There are two differences between this immigration boom and the very large inflows of the mid-1990s. First, the flows have included both New Zealanders returning home and foreigners deciding to settle there. Many are young, skilled and bring back substantial savings (especially when converted to New Zealand dollars). Second, the flow is primarily a mix of people of working age and secondary level students, whereas the boom in the mid-1990s saw more families with children. Consequently, net arrivals have been boost ing the labour force at an annualised rate of around 1 1/2 per cent in late 2001 and early 2002.

With unemployment at historically low levels and strong employment growth, labour-market conditions had become increasingly tight in the first half of 2001. Skill shortages were emerging in some sectors. However, with labour-market participation rising, migration flows turning positive around the middle of the year and the pace of economic activity remaining slightly below potential, these pressures appeared to ease in the latter part of the year.

Wage developments have contributed to keeping domestic inflationary pressures moderate in recent years, and they continued to do so in 2001 in spite of tightening labour-market conditions. Fears that wage behaviour might be affected by the introduction of the Employment Relations Act in 2000 (OECD, 2000a) have not, so far, been borne out by actual developments. Although the increase in average hourly earnings, at 3.3 per cent, was over one percentage point higher than in 2000, they were most likely a delayed response to the higher 2000 inflation, which had generated a real wage loss. Wage pressures in the public sector, however, have been stronger. There has also been a pickup in strike activity, especially in the health and education sectors.

Headline inflation has declined, but some price pressures remain in the system

Consumer price inflation spiked in 2000 as a result of rising oil prices and an increase in tax on tobacco (Table 4 and Figure 6). The weak currency also added to inflationary pressures. Headline inflation remained above the Reserve Bank's 0-3 per cent target range until mid-2001. While it has fallen back below 3 per cent since then, most measures of core or underlying inflation have been progressively increasing since early 2000, and tend to be near the top of the target range. Food prices have been a large contributor, having increased at around 5-6 per cent for much of 2001. In part this has been caused by high commodity prices. On the other hand, prices of non-tradables did not seem to be recording any indirect impact of the acceleration of tradables' prices, and continued to grow between 2 and 2 1/2 per cent throughout the year (if a temporary downward effect due to lower rents on public housing is excluded). This should provide some comfort to the Reserve Bank now that commodity prices have turned down, and presumably therefore so will tradables price inflation. The deceleration of food prices in early 2002 seems to indicate that this is indeed starting to happen.

The limited impact of the large previous exchange-rate depreciation on domestic prices has helped the task of the monetary authorities considerably in the recent phase. As in several other countries, the pass-through has declined significantly in recent years. The Reserve Bank estimates that a 1 per cent fall in the trade-weighted exchange rate will push up consumer prices by between 0.1 and 0.2 per cent, compared to their estimate of 0.4 a decade ago. Domestic profit margins do not appear to be particularly squeezed at present -- although there is wide variation across sectors -- suggesting the phenomenon may be due to greater pricing-to-market behaviour. Some importers attribute this to the weakness in Asia following the 1997 crisis, which has created a highly competitive buyers' market. However, they also feel that those economies' recovery is now limiting their ability to bargain down prices. If so, exchange-rate passthrough may pick up again, in which case the Reserve Bank might need to be a little more concerned than otherwise with any further currency weakness. Moreover, with output close to potential and most measures of underlying inflation still in the upper part of the target range, the risk of demand-driven pressure on domestic prices remains high, as also indicated by surveys of retailers consistently showing a majority expecting to raise prices.

The external deficit has improved, but only temporarily

The current account deficit, which had averaged almost 6 per cent of GDP during the previous five years, has declined substantially, running at around 3 per cent of GDP in 2001 [Figure 7 and Table 5). The substantial increase of the trade surplus was a major factor behind this result, but the improvement of the service balance, mainly as a result of tourism receipts, was also important. However, given the extent of the previous depreciation, the deficit could have been expected to narrow further. In particular, the shift of resources to the tradables sector has been relatively limited, and the performance of manufacturing exports a little disappointing. A perception that a depreciated exchange rate is required in order to generate a sufficient trade surplus to service a growing external debt may be one of the factors that so far has kept the New Zealand dollar from moving back toward its long-term trend level.

While part of the recent improvement in the current account balance may be structural, the component that is due to the terms of trade has begun to reverse. According to the government projections the current account deficit should stabilise at around 4 per cent of GDP. As net external liabilities currently amount to slightly over 80 per cent of GDP, a deficit of this magnitude would imply an approximately constant ratio of net debt to GDP under the reasonable assumption that the long-term growth of nominal output is around 5 per cent. This scenario would continue to imply a substantial vulnerability of New Zealand's external position to adverse shocks. It is true that, while about 60 per cent of New Zealand's external debt is denominated in foreign currency, a very high proportion of that is hedged (either with financial instruments or by natural hedges). Moreover, the banking system is in good shape and the financial positions of both the business and household sectors are relatively sound. Nevertheless, e ven in the absence of major financial fragilities, an adverse shock hitting an economy with an already large structural deficit and net debtor position could raise sustainability concerns, bringing about a substantial depreciation and real income losses. In addition, the current position means that ongoing access to international capital at reasonable interest rates is particularly important. This underscores the need to maintain credibility through sound monetary and fiscal management and a strong structural framework.

Underlying the persistent current account deficit has been the low aggregate saving rate. Even after the end of the real estate price inflation, which during the 1990s had boosted the household sector's wealth and encouraged it to accumulate substantial debt, measured household savings remained negative in 1998-2000, and overall national savings continued to average slightly over 15 percent of GDP. Unless private savings recover in coming years (as seems to have been the case in 2001), and continue to be supported by growing government savings, financing the likely cyclical increase in business investment and the substantial projected public investments (see Chapter II) may require larger current account deficits than those envisaged in official projections.

Short-term outlook: the lucky country

The short-term outlook reflects what has been, to some extent, fortunate timing. Domestic demand has been gaining momentum as a result of the trickledown effects of high farm incomes and the sudden increase in net migration flows. In addition, consumers bringing forward purchases of (used) imported cars before safety regulations were tightened on I April boosted consumption in late 2001 and early 2002. This component of demand will be correspondingly soft in the middle of this year as this temporary effect unwinds. All these factors were well timed to offset the slump in export earnings, the major impact of which is being felt in the first half of 2002. As a consequence, overall economic activity has cruised through the global turbulence reasonably smoothly (Figure 8). Looking forward, GDP is expected to grow at annual rate of around 2 per cent in the first half of 2002 and then rise into the 3-4 per cent range until the end of 2003 (Table 6).

After falling throughout 2001, New Zealand's export markets are projected to rebound in the second half of this year and to grow by around 7 1/2 per cent in 2003. This should boost all categories of exports. Tourism, which has already more than fully bounced back, partly in response to the pickup in world income growth, is likely to continue to benefit from the low exchange rate, which will ensure that New Zealand remains a cheap destination. However, the full benefit of this recovery will not be seen until the next southern summer. Agricultural exports are likely to be assisted by recent favourable growing conditions and by China's entry to the World Trade Organisation, but this will be partly offset by the adverse impact on world prices of the latest increase in United States and European Union subsidies. Manufactured exports should also benefit to some extent from the rebound in global imports, although that sector has surprisingly been losing market share since the mid-1990s. Looking further out, forestry is projected make a major contribution over the medium term. A large stock of mature forests means there is potential for the harvest to expand by at least a fifth over the next five years, so considerable volume growth can be expected as soon as forestry prices recover.

Although more goods and services are expected to be shipped over the next few years, growth in export incomes will be less vigorous. The terms of trade have fallen from their recent peak and are not projected to bounce back, although they should still settle at a level that is fairly high by recent standards. The net result of higher volumes and weaker prices is a current account deficit that is projected to rise to over 4 per cent of GDP, from the recent trough of around 3 per cent.

Net immigration should continue to be a key influence on the outlook at least until the end of this year. While the rate of inflow is expected to decline throughout 2002, it is expected to add up to 3/4 of a per cent to the working-age population. That will have three effects. First, migration will continue to lift the housing market. Construction is projected to continue rising, especially in Auckland, and house prices will soon follow. However, the lift will probably be significantly gentler than the mid-1990s housing boom: the migration inflow will be smaller and not as long-lasting; house prices are not starting from a position of significant under-valuation; and household debt levels have now risen to around OECD norms, so further gearing-up is not likely. Consequently, housing investment relative to GDP is likely to fall well short of its last two cyclical peaks. Second, the inflow will underpin consumption. That is partly by weight of numbers, but partly because consumption of durable goods will continue to grow strongly as migrants fit out their new houses. Business investment should also rise further as economic slack becomes quickly exhausted. Third, employment will increase as immigrants are absorbed in the labour market. The increased supply of workers -- especially skilled workers -- could also take some of the pressure off wages. Normally, however, one would expect the incremental effect of immigration on the demand for goods and services to outstrip the supply effect in the short term.

Headline inflation fell from 4 per cent in late 2000 to 2.6 per cent in the year to March 2002, after being held down last year by the reduction in rents on government-owned houses and a reduction of petrol prices. This year it will be boosted by an increase in petrol tax, which will raise petrol prices by around 5 per cent. After stripping out one-off influences, core inflation is projected to remain inside, but in the upper half of, the 0-3 per cent target range. The unemployment rate, although rising slightly, should stay relatively low; the weak exchange rate continues to put pressure on prices of tradable goods and services; and the pickup in activity could quickly eliminate the small negative output gap that is currently estimated to exist. All these factors point to core inflation rates remaining above 2 per cent throughout the projection period, even with short-term interest rates rising to 6 per cent by the end of this year (see Chapter II).

The risks to this outlook remain considerable, even though they have diminished relative to six months earlier. A stronger- or quicker-than-expected recovery in global activity would put pressure on an economy that even now has little spare capacity, especially if the terms of trade also recover. The experience could repeat that of 1993, when a strong global recovery occurred in tandem with a very weak domestic exchange rate. The result at that time was export growth rates over ten per cent per annum, GDP growth rates in the 6-8 per cent range, and inflation picking up about a year later. Any bounce-back this time should be less vigorous since there is less room to grow quickly (the output gap in 1992 was minus 5 per cent). However, that same factor implies that the flare-up of inflation could be quicker and stronger. The risks to inflation would be compounded if importers take advantage of the stronger economy to recover their profit margins. On the other hand, the opposite global scenario could have significant negative impacts on the economy. As noted, the engine of growth in early 2002 has been domestic demand plugging the gap left by a weakening external sector. But that domestic demand is mostly a consequence of last year's high farm incomes, so a further weakening in exports is likely to see domestic economic strength dry up. How quickly weaker world demand will transmit to the domestic economy is not clear; via a mix of hedging and forward selling, farm incomes will respond in a lagged way to lower global prices. In essence, both scenarios involve the domestic and external sectors starting to move in tandem, either up or down, instead of the current situation of one offsetting the other. An end to the "lucky timing" would result in an economy that is either unusually strong or unusually weak. In either case, the policy response would need to be quick and fairly aggressive.

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Table 1

Demand and output

Volume percentage change at annual rates, calendar years

                                     1997
                                     NZ$       1970-83  1983-91 (1)
                                   billion

Private consumption                  57.6        1.5        1.9
Government consumption               17.8        3.0        1.4
Gross fixed investment               21.3        2.2       -0.4
 Public                               3.5        4.2       -5.3
 Residential                          6.0        0.0        1.7
 Non-residential                     11.8        2.0        1.7

Final domestic demand                96.8        1.9        1.4

Stockbuilding (2)                     0.7       -0.1        0.0

Total domestic demand                97.5        1.7        1.5

Expors of goods and services         29.2        3.9        5.0
Imports of goods and services        28.7        2.8        4.7

Foreign balance (2)                   0.5        0.3        0.3

GDP (expenditure basis)              97.9        2.0        1.6

Agriculture, forestry and fishing     7.1         ..        3.1
Mining and quarrying                  1.5         ..        0.7
Manufacturing                        16.5         ..       -3.1
Construction                          4.1         ..       -9.1
Services                             62.1         ..        0.6

GDP (output basis)                   97.2        2.1        1.1

Memorandum item:

Per capita GDP                       26.0 (3)    1.0        0.7


                                   1991-98  1997   1998  1999  2000


Private consumption                  3.0     2.3    1.7   4.2   2.1
Government consumption               2.4     7.0   -0.8   5.7  -2.5
Gross fixed investment               6.5     1.1   -4.8   3.1   7.3
 Public                              1.3    21.5   -5.8  -2.4   5.7
 Residential                         4.6     6.4  -16.1  11.0  -0.4
 Non-residential                     9.3    -6.1    1.7   1.0  11.5

Final domestic demand                3.6     2.9   -0.1   4.2   2.2

Stockbuilding (2)                    0.1    -0.2   -0.5   1.3  -0.6

Total domestic demand                3.7     2.7   -0.7   5.5   1.4

Expors of goods and services         4.4     3.7    1.2   7.1   7.6
Imports of goods and services        6.7     2.4    1.4  11.7   1.1

Foreign balance (2)                 -0.5     0.4    0.0  -1.3   2.0

GDP (expenditure basis)              3.0     3.1   -0.7   4.2   3.6

Agriculture, forestry and fishing    2.4     3.5   -2.9   4.2   5.9
Mining and quarrying                 2.2    18.4  -15.2  -1.1  -2.8
Manufacturing                        2.5     1.9   -4.6   2.3   4.3
Construction                         3.4     5.4   -9.2   4.7   3.0
Services                             3.5     2.3    2.3   4.2   3.6

GDP (output basis)                   3.1     2.2   -0.2   3.9   3.8

Memorandum item:

Per capita GDP                       1.7     1.8   -1.6   3.7   3.0


                                   2001


Private consumption                 2.1
Government consumption              2.1
Gross fixed investment             -0.6
 Public                            -9.7
 Residential                       -9.6
 Non-residential                    5.6

Final domestic demand               1.6

Stockbuilding (2)                   0.2

Total domestic demand               1.7

Expors of goods and services        2.1
Imports of goods and services       1.7

Foreign balance (2)                 0.2

GDP (expenditure basis)             1.8

Agriculture, forestry and fishing   1.6
Mining and quarrying                0.3
Manufacturing                       0.5
Construction                       -5.9
Services                            4.0

GDP (output basis)                  2.4

Memorandum item:

Per capita GDP                      1.1

(1.) 1988-91 for components of GDP by industry.

(2.) Contribution to GDP volume growth.

(3.) NZ$ thousands.

Source: Statistics New Zealand and OECD.
Table 2

Trade Volumes and prices

Percentage change

                       1995    1994  1995  1996  1997   1998  1999  2000
                      shares

Export volumes

  Total goods         100.0    10.1   2.9   4.8   5.6   -1.0   1.6   6.1
    Food               42.3     8.0   5.2   7.5   5.7   -1.7  -0.1   7.6
    Manufactures (1)   35.4    13.0   3.6   4.3   9.2    1.0   5.8   5.4
    Raw materials      20.0     8.9  -2.3  -0.4  -1.1   -4.2   1.0   7.2

Export prices

  Total goods                  -4.0  -1.7  -3.5  -2.7    4.8   1.4  17.1
    Food                       -8.3  -5.3   0.1  -3.0    9.7   3.2  11.6
    Manufactures (1)            1.4   2.1  -7.1  -2.5    3.5  -2.0  20.7
    Raw materials               0.4   3.4  -8.8  -2.6   -2.6  -1.2  17.8

Import volumes

  Total goods         100.0    16.3   6.5   3.4   3.6    2.4  13.4  -2.7
    Manufactures (1)   84.4    17.4   7.1   3.4   4.3    1.0  15.6  -3.4
    Energy              5.3    16.2   1.6  11.8   0.7   13.1   1.0   3.6

Import prices

  Total goods                  -3.6  -0.1  -2.6  -1.1    3.8   2.2  16.5
    Manufactures (1)           -2.8  -0.1  -3.7  -2.1    5.0   1.4  11.0
    Energy                    -15.6   0.7   6.5   6.2  -14.7  19.7  84.5
    Terms of trade             -0.5  -1.6  -1.0  -1.6    0.9  -0.8   0.6

                      2001


Export volumes

  Total goods          3.1
    Food               5.6
    Manufactures (1)   0.8
    Raw materials      2.9

Export prices

  Total goods          9.2
    Food              14.5
    Manufactures (1)   7.5
    Raw materials     -0.1

Import volumes

  Total goods          1.9
    Manufactures (1)   1.6
    Energy            -3.1

Import prices

  Total goods          1.5
    Manufactures (1)   1.3
    Energy            -0.8
    Terms of trade     7.6

(1.) Non-food manufactures.

Source: Statistics New Zealand.
Table 3

The labour market

Annual percentage change over corresponding period


                         1997      1998      1999      2000


Working age population    1.3       0.9       0.6       0.7
Labour force              1.0       0.2       0.7       0.8
Employment                0.4      -0.6       1.4       1.6
  Full time              -0.1      -1.2       1.1       2.6
  Part time               1.9       1.2       2.8      -1.6

Unemployment rate (1)     6.7       7.5       6.8       6.0
Participation rate (2)   65.6      65.2      65.3      65.4
Employment ratio (3)     61.3      60.3      60.8      61.4

Labour productivity (4)

  Output basis            1.8       0.5       2.5       2.2
  Expenditure basis       2.7      -0.1       2.7       1.9

Memorandwn item:

Net migration (1)         0.1      -0.1      -0.1      -0.2

                                            2001
                         2001
                                     Q1        Q2        Q3

Working age population    0.8       0.7       0.7       0.9
Labour force              1.8       1.3       2.3       1.5
Employment                2.5       2.3       3.2       2.2
  Full time               2.4       3.2       3.3       1.5
  Part time               2.7      -0.7       3.0       4.5

Unemployment rate (1)     5.3       5.4       5.2       5.2
Participation rate (2)   66.0      65.6      65.9      65.9
Employment ratio (3)     62.5      62.0      62.5      62.5

Labour productivity (4)

  Output basis           -0.1      -1.3       0.0       0.3
  Expenditure basis      -0.7      -2.4      -0.9       0.1

Memorandwn item:

Net migration (1)         0.1      -0.3      -0.1       0.3

                            2001

                           Q4

Working age population    1.1
Labour force              2.0
Employment                2.3
  Full time               1.8
  Part time               4.0

Unemployment rate (1)     5.4
Participation rate (2)   66.4
Employment ratio (3)     62.8

Labour productivity (4)

  Output basis            0.6
  Expenditure basis       0.5

Memorandwn item:

Net migration (1)         0.6

(1.) Per cent of labour force.

(2.) Labour force/population 15 years and over.

(3.) Employment/population 15 years and over.

(4.) GDP per person employed.

Source: Statistics New Zealand.
Table 4

Wages, prices and costs

Annual percentage change over corresponding period


                          1997      1998      1999      2000


Wages

 Average weekly earnings   3.4       2.6       2.4       2.1
 Salary and wage rates
    Private sector         2.0       1.6       1.5       1.4
    Central government     3.2       2.5       1.7       2.2
  Unit labour costs        1.7       0.9        --        --

Prices

  Consumer prices          1.2       1.3      -0.1       2.6
    Non-food, non-energy   0.9       0.8      -0.4       2.9
    Food                   2.2       3.2       1.0       1.3
    Petrol                 0.2      -6.1       0.6      24.7

  Producer prices

    Inputs                 0.4       0.7       1.0       7.6
    Outputs                0.7       0.8       0.9       5.2
  GDP price deflator       0.1       1.4      -0.4       2.5
  Import price deflator   -0.7       5.4       0.6      13.8
  Export price deflator   -2.3       5.6      -0.3      14.2

                                             2001
                          2001
                                     Q2         Q3         Q4

Wages

 Average weekly earnings   3.5      4.0        3.9        3.6
 Salary and wage rates
    Private sector         2.0      1.9        2.1        2.1
    Central government     1.9      1.4        1.9        2.2
  Unit labour costs         --       --         --         --

Prices

  Consumer prices          2.6      3.2        2.4        1.8
    Non-food, non-energy   2.0      2.8        1.7        0.9
    Food                   6.0      6.0        6.6        6.7
    Petrol                -2.0      9.6       -7.0      -15.4

  Producer prices

    Inputs                 7.4      8.1        6.2        1.8
    Outputs                5.6      6.1        4.7        2.6
  GDP price deflator       4.9      6.1        4.4        3.5
  Import price deflator    2.4      8.0        1.0       -7.6
  Export price deflator    7.9      14.2       5.4       -2.5

                          2002

                            Q1

Wages

 Average weekly earnings    --
 Salary and wage rates
    Private sector          --
    Central government      --
  Unit labour costs

Prices

  Consumer prices          2.6
    Non-food, non-energy    --
    Food                   5.3
    Petrol                -7.0

  Producer prices

    Inputs                  --
    Outputs                 --
  GDP price deflator        --
  Import price deflator     --
  Export price deflator     --

Source: Statistics New Zealand; OECD, Main Economic Indicators.
Table 5

Balance of payments

NZ$ million, calendar years

                            1994    1995    1996    1997    1998    1999

Exports                   20 189  20 515  20 858  21 515  22 881  23 809
Imports                   17 880  19 166  20 074  20 228  21 181  24 678

Trade balance              2 309   1 349     783   1 288   1 702    -871

Non-factor services, net    -552    -307    -375    -986  -1 500    -552

Investment income, net    -5 751  -6 033  -6 845  -7 289  -4 882  -5 916

Transfers, net               495     303     700     384     537     394

Invisibles, net           -5 808  -6 037  -6 520  -7 891  -5 845  -6 074

Current balance           -3 499  -4 688  -5 737  -6 603  -4 145  -6 945
 Per cent of GDP            -4.1    -5.1    -5.9    -6.6    -4.1    -6.7

                            2000    2001

Exports                   29 697  33 115
Imports                   28 356  29 622

Trade balance              1 339   3 494

Non-factor services, net    -480    -108

Investment income, net    -7 529  -7 450

Transfers, net               528     267

Invisibles, net           -7 481  -7 291

Current balance           -6 142  -3 800
 Per cent of GDP            -5.6    -3.2

Source: Statistics New Zealand.
Table 6

Short-term economic projections

                                           Level, 2000        Percentage
                                                                change

                                       Current
                                       prices,    Per cent  2001
                                     NZ$ billion   of GDP

Private consumption                      66.6       60.3     2.1
Government consumption                   20.0       18.1     2.1
Gross fixed investment                   22.1       20.0    -0.6
Final domestic demand                   108.7       98.5     1.6
Stockbuilding (1)                         0.7        0.6     0.2
Total domestic demand                   109.4       99.1     1.7
Exports of goods and services            39.1       35.5     2.1
Imports of goods and services            38.2       34.6     1.7
Foreign balance (1)                       1.0        0.9     0.2

GDP at constant prices                                       1.8

GDP price deflator                                           4.9
GDP at current prices                   110.4      100.0     6.8

GDP production at constant prices                            2.4

Consumer Price Index                                         2.6
Private compensation per employee                            3.6
Total employment                                             2.5
Unemployment rate (per cent               6.0                5.3
of labour force)
Breakdown of gross fixed investment
  Private non-residential                12.7       11.5     5.6
  Private residential                     6.0        5.4    -9.6
  General government                      3.4        3.1    -9.7
Short-term interest rate (per cent)       6.5                5.7
Long-term interest rate (per cent)        6.9                6.4
Current account balance as a             -6.0       -5.5    -3.2
per cent of GDP

                                      Percentage change


                                     2002      2003


Private consumption                   2.8       3.1
Government consumption                2.0       2.8
Gross fixed investment               11.1       5.2
Final domestic demand                 4.3       3.5
Stockbuilding (1)                    -0.3       0.0
Total domestic demand                 4.3       3.4
Exports of goods and services         1.4       7.5
Imports of goods and services         5.2       7.5
Foreign balance (1)                  -1.2       0.0

GDP at constant prices                2.9       3.5

GDP price deflator                    1.6       2.6
GDP at current prices                 4.6       6.2

GDP production at constant prices     2.7       3.5

Consumer Price Index                  2.5       2.0
Private compensation per employee     3.5       3.5
Total employment                      1.4       1.3
Unemployment rate (per cent           5.7       5.3
of labour force)
Breakdown of gross fixed investment
  Private non-residential             6.5       5.5
  Private residential                21.5       4.3
  General government                 12.8       5.5
Short-term interest rate (per cent)   5.5       6.0
Long-term interest rate (per cent)    6.9       6.6
Current account balance as a         -4.0      -4.0
per cent of GDP

(1.) As a percentage of GDP in the previous period.

Source: OECD.


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