Staff Report For The 2015 Article IV Consultation—Informational Annex

Growth has moderated as tailwinds have waned: dairy prices have fallen sharply from historic highs and investment activity related to the Canterbury rebuild has reached a plateau. The short-term outlook is challenging with both external and domestic risks, the latter arising from rapid house price inflation in Auckland. However, New Zealand's flexible economy is resilient, and medium-term prospects remain positive. Monetary policy has been eased since June and the Reserve Bank stands ready to reduce rates further if warranted. Given the below-potential growth, measures of core inflation around the lower end of the target band, and a still strong exchange rate, the monetary policy stance is appropriate.

Abstract

Growth has moderated as tailwinds have waned: dairy prices have fallen sharply from historic highs and investment activity related to the Canterbury rebuild has reached a plateau. The short-term outlook is challenging with both external and domestic risks, the latter arising from rapid house price inflation in Auckland. However, New Zealand's flexible economy is resilient, and medium-term prospects remain positive. Monetary policy has been eased since June and the Reserve Bank stands ready to reduce rates further if warranted. Given the below-potential growth, measures of core inflation around the lower end of the target band, and a still strong exchange rate, the monetary policy stance is appropriate.

Fund Relations

(As of December 31, 2015)

Membership Status: Joined: August 31, 1961; Article VIII

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Exchange Arrangement:

New Zealand accepted the obligations of Article VIII on August 5, 1982. The New Zealand dollar has floated independently since March 1985 and the de facto exchange rate arrangement is free floating. New Zealand maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions, other than restrictions notified to the Fund in accordance with Decision No. 144-(52/51).

Article IV Consultation:

New Zealand is on the 12-month consultation cycle. The 2014 Article IV consultation was concluded by the Executive Board on June 5, 2014.

FSAP Participation and ROSCs:

FSAP mission took place during October 30–November 18, 2003. The FSSA and the Detailed Assessments of Observance of IOSCO Objectives and Principles of Securities Regulation and FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism were published under Country Reports No. 04/126, No. 04/417, and No. 05/284, respectively.

Technical Assistance: None

Statistical Issues

Data provision is adequate for surveillance. The authorities are continuing to enhance data quality and expand the range of data available, and are making progress towards subscribing to the IMF’s Special Data Dissemination Standard (SDDS).

Table of Common Indicators Required for Surveillance

(As of January 4, 2016)

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Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.

Foreign, domestic bank, and domestic non-bank financing.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA).

New Zealand: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for New Zealand
Author: International Monetary Fund. Asia and Pacific Dept