New Zealand: Selected Issues

September 20, 2019

Preview Citation

Format: Chicago

New Zealand: Selected Issues, (USA: International Monetary Fund, 2019) accessed December 25, 2024

Summary

This Selected Issues paper discusses interactions between external risks and the New Zealand economy. The current set of external risks has the potential to be extremely damaging to New Zealand, but two factors would likely mitigate the economic impact. First, the flexible exchange rate regime is a reliable shock absorber and automatic stabilizer from the perspective of GDP, although it leads to a rebalancing between the domestic and external sectors in the economy. Second, net migration flows can reduce the negative impact of lower external demand under some circumstances, such as a growth slowdown in Australia. Fiscal policy could also offset some of the short-term costs of adjustment. Fiscal policy can provide stimulus at relatively small and manageable cost to the already-low government debt to GDP ratio. Moreover, at the current juncture, fiscal policy might need to provide the bulk of policy support against negative shocks, as monetary policy might be ineffective if has become constrained by an effective lower bound on the monetary policy interest rate.

Subject: Consumption, Financial sector policy and analysis, Financial sector stability, Income, Macroprudential policy, Migration, National accounts, Population and demographics

Keywords: Consumption, Consumption-equivalent welfare index, CR, Financial sector stability, Global, Income, Income growth, ISCR, Living standard framework, Macroprudential policy, Migration, Monetary policy, Price, Welfare advantage, Wellbeing indicator

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Country Report No. 2019/304
Stock No:

1NZLEA2019003
ISBN:

9781513514765
ISSN:

1934-7685

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