January, 2005

January, 2005

Comment

What is the economic outlook for 2005? Suggestions this time last year that the economy would slow in 2004 proved to be wrong. There are a number of factors that will affect economic performance this year. The value of the NZ dollar, the level of commodity prices, export volumes and prices (and expiry of some exchange rate hedges which soften the impact of the high dollar) will be some key factors in the export sector. Interest rates, the consumption impact of tax cuts for low income families, migration, employment levels, housing and construction will also be important drivers. Retail spending remains strong, company profits are up and the Government is in a strong fiscal position. So there are plenty of factors that can offset each other which means that although the economy is expected to slow, no-one can be too sure about how much and when.