The Rugby World Cup is putting the media spotlight on New Zealand. The New Zealand macroeconomic experience is fascinating – very similar to Ireland in some respects but also with major differences in terms of its exchange rate and banking-sector policies. In this new paper, I examine the New Zealand situation, with a particular focus on its external imbalances.
Abstract
This paper argues that large external imbalances pose significant macroeconomic risks for New Zealand. While New Zealand has coped well in recent years, the global financial crisis has underlined the vulnerability of deficit countries to financial shocks. New Zealand can draw important lessons from the global crisis by adjusting its macroeconomic policy framework to further mitigate the risks embedded in its international balance sheet.
4 replies on “Rugby World Cup Special”
Thank God for small mercies. Dublin has minimal earthquake risk.
http://www.foxbusiness.com/industries/2011/08/29/new-zealand-government-delegation-to-travel-to-europe-to-allay-reinsurers/
Christchurch has been hit by more than 8,000 earthquakes since a
7.0-magnitude quake Sept. 4, 2010, including a 6.3-magnitude
earthquake Feb. 22 that left more than 180 dead. The damage is expected
to cost at least NZ$25 billion (US$21 billion)
When is the Irish economy blog going to do a serious study of the Hunky Dory advertisement campaign ?
I am sure it would be very interesting.
For a Dork who has never took much notice of Bogball and its many cultural offshoots it has been a revelation.
What’s missing I think is a longer-term perspective on NZ. Many of the structural reforms called for are things NZers thought they’ve been doing since the 1980s. I’m showing my age but I remember the glory days of Rogernomics being held up as a beacon to the Anglophone countries in the northern hemisphere including Ireland. In fact, NZ is a sobering case for Ireland because it shows that a peripheral agricultural economy has high fragility even when economic orthodoxy has been followed down the line for decades. Which is not to excuse our Celtic Tiger excesses, but geography is surely part of the story for our Antipodean cousin as well as us.
It would surely be a good thing!
The exports to GDP ratio is also at 31%.
The National Competitiveness Council commented in its report this week that the Irish indigenous sector accounting for 10% of tradeable exports, contributes as much to the economy as the FDI sector.
We reported in 2008 that New Zealand’s success has been its innovative approach to new markets especially but not only in Asia, where growing wealth is seeing consumers shift their eating habits from root vegetables to dairy and meat products.
“The food industry in New Zealand developed specific measures and worked with external partners to develop new technologies and new products. They created specific products for specific markets and created best practice dairy markets in Asia. And despite being 12,000 miles away from European markets, New Zealand has become increasingly competitive for its chilled lamb and their lamb exports to the EU have increased 40% in the last two years”.
Ireland is not able to match a company like Fonterra, which accounts for one-third of international dairy trade, in terms of its experience in selling to over 140 countries.