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Strong Australian economy positive for NZ, says BNZ

Contributor:
Fuseworks Media
Fuseworks Media

Wellington, April 23 NZPA - It is a good thing for New Zealand that the Australian economy is doing so well, according to Bank of New Zealand economists.

They acknowledge that more New Zealand workers will move to Australia, and a strong Australian economy will provide competition for capital.

They ask, will New Zealand get the crumbs from Australia or be a lucky neighbour?

"We have no doubt that a booming Australian economy is a net positive for New Zealand. Indeed, it forms a significant component of our forecast recovery for New Zealand through 2010 and 2011," BNZ economists said in a report.

Australian imports are expected to rise a hefty 17.4 percent in 2010 and a further 12.5 percent in 2011. This is positive because Australia buys 23 percent of New Zealand's merchandise exports.

"Australian economic growth and a crossrate below A77.00c is a win-win for New Zealand producers supplying the Australian market.

"High incomes breed an expanding market and the lower NZ dollar helps make kiwi products more competitive against their Australian equivalents," BNZ said.

New Zealand exports to Australia rose 6.6 percent in the three months to February.

The strong Australian economy was also no doubt one factor behind a general improvement in tone in the New Zealand manufacturing sector.

Australian visitors arrived in record numbers in 2009, in part due to a very good ski season.

Still, the economists note that it is a relief that New Zealand never went into a currency union with Australia. The two central banks have been on different paths with Australia tightening monetary policy.

"One can only wonder how the New Zealand economy would be looking if we had something similar to Australian monetary conditions," BNZ said.

BNZ is a unit of National Australia Bank.

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