The Week Ahead (June 24-28), New Zealand’s RBNZ – In The Company Of Doves

Market participants in the week ahead will receive further insights into New Zealand’s economy, including updates on business and consumer confidence, as well as a rate decision from the country’s central bank.

The week gets underway Monday with a fresh gauge on the nation’s trade balance, amid ongoing friction between the U.S. and China. Indeed, trade-related disputes have generally posed a threat to some of New Zealand’s key trading partners, including Australia, Europe, and China.

The Reserve Bank of New Zealand (RBNZ) has warned that the country’s economic growth could decelerate over the next year if a global economic slowdown reduces overseas demand for its exports, which focuses mainly on dairy-related goods.

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Weaker Global Economic Outlook spurs first RBNZ rate cut since november 2016

In the face of slowing global growth, Moody’s analyst Matthew Circosta recently noted that New Zealand is “increasing its spending on well-being priorities while maintaining a fiscal surplus, denoting its high budgetary flexibility.”

While Moody’s expects this increased spending will contribute to smaller fiscal surpluses and a slower pace of debt reduction than previously expected, fiscal slippage, if any, will likely be small, and unlikely to significantly alter their paths.

Circosta said the country’s “robust fiscal position also provides it with greater fiscal room than many similarly rated high-income sovereigns to counter potential future shocks.”

Moody’s expects the country’s budget to remain in surplus over the next few years and, as a result, for general government debt to continue edging down as a share of GDP to around 28% by 2020 from 30.5% in 2018 – well below its pristine ‘Aaa’ credit rating median of 36%.

Monday, June 24

  • Trade Balance (May)
  • Imports / Exports (May)

Central Bank To Set OCR After Dovish Decision

Meanwhile, the RBNZ is slated Tuesday to unveil its Official Cash Rate (OCR) decision after the central bank cut its interest rate by 25 basis points to 1.5% at its prior monetary policy meeting in May.

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