Thursday, June 07, 2007
NEW ZEALAND'S INFLATION COMBAT
Coming across the Market Scan in Forbes, it notes that New Zealand is facing rough temporary inflation turbulence resulted from an accelerated domestic demand, roaring property market and rising government spending. Consequently, the Reserve Bank of New Zealand send a silent shock to investor by raising the official cash rate from 7,75 percent to 8,00 percent. The feature sizzled the New Zealand dollar onto the record level, but it depressed local stock prices as NZW-50 index fell 1,2 percent. Since it was floated in 1985, the New Zealand dollar (kiwi) rose to 76 U.S. cents compared to last year's "below-60" level. The Reserve Bank aims to keep the inflation within 1%-3% medium range. However, official statistics shows an uncomfortably high spending, based on fiscal expansions as well as on the acceleration of public consumption, further braking-down the effectiveness of fiscal behavior in a long-term perspective and warming an already-bubbled asset market whose property prices almost doubled from a total value of 282 billion Australian dollars ($234.8 billion) in the last quarter of 2002, to 559 Australian dollars ($465.5 billion) at the end of 2006.