On March 1st, the NZIER released the March 2010 Quarterly Predictions report, which stated that although New Zealand is no longer facing a recession, its economic recovery will be slow and “jagged”. Growth of only 2.7 percent was projected for the 2010 calendar year, and 1.4 percent for 2011. Shamubeel Eaqub, NZIER Principal Economist, stated that several key economic indicators, both internationally and locally, are giving cause for concern and calling for restraint on any recovery estimates.

According to the report, the New Zealand Reserve Bank does not yet have any reason to raise the Official Cash Rate (OCR) yet, though the move should be considered in September. Unemployment in 2010 will peak at 7.5 percent, compared to 7.3 percent in December 2009. Further, constraints in wages will be seen for another 12-24 months. Household spending is projected to experience a slow recovery. The report also claimed that the housing sector will experience slow growth, and be hampered by rising mortgage rates.

Shamubeel Eaqub admitted to a certain amount of uncertainty in regards to any economic projections made, as there are renewed signs of flagging consumer confidence both within New Zealand and internationally. Additionally, yet to be announced tax regime changes lend a level of unpredictability to the growth and recovery possibilities of New Zealand.

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At the quarterly Reserve Bank OCR Review, on January 28th, it was announced that the rate would remain at its current level of 2.5 percent. Alan Bollard, Reserve Bank Governor, said that the decision comes as a result of the economy remaining consistent with projections made in the December Monetary Policy Statement. He continued on to say that the annual CPI inflation is situated squarely in the target band and is expected to remain within the area over the medium term.

The New Zealand OCR has remained at 2.5 percent since April 30th, 2009. It has been unchanged through six OCR review announcements. Economists predict that the rate will be raised in mid-2010 if evidence surfaces regarding the sustainability of New Zealand’s current economic recovery.

Expanding on his decision, Alan Bollard explained that rising economic conditions across the world are driving the price of New Zealand commodities higher, aiding in the country’s recovery. Though the Governor expressed concern regarding the ability of Australia and Asian nations to maintain their economic upturns. Further, he claimed that the New Zealand Government’s fiscal and monetary stimulus policies have aided the country’s recover, but could be withdrawn in mid-2010, as the need for them declines.

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Neil Quigley, a Victoria University Professor of Economics, and Kerrin Vautier, an Auckland-based consulting research economist, were announced to have received the positions on January 19th. The two new appointees replace Alison Paterson and Sir John Goulter, who have served fifteen and ten years respectively in the positions.

According to Bill English, the Government was seeking candidates with an understanding of both macroeconomic and real-world business principals for the positions. He continued on to say that both candidates posses the required strong economic backgrounds and experience within a range of ventures. Further, commenting on the appointments, Bill English said “I’m confident they have the skills to help the bank meet its targets and promote and maintain a sound and efficient financial system.”

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According to statements made by John Key, New Zealand Prime Minister, and reports by the New Zealand Reserve Bank, the economy will continue to recover over the second half of 2009. The Prime Minister said that the New Zealand GDP in the fourth quarter will be “quite good” and that the third quarter figure “won’t be bad either”.

The recovering economic figures are due highly to the recovery of the Australian economy, destination for approximately one quarter of New Zealand’s exports. This prompted Alan Bollard, Reserve Bank Governor, to issue a waring that while New Zealand and Australia and New Zealand are closely related, they are not the same economy and act differently. According to him, New Zealand is “slower and more vulnerable”. He continued to say that “a difference financial markets do not appear to appreciate”. He wared that investors seem to be treating New Zealand and Australia the same, and that while looking at the current recovery, this was a mistake.

Several economic indicators are serving to confirm the recovery sentiment. House prices have risen 7.9 percent since January, business confidence is at a 10-year high. Consumer spending and confidence reports are also positive. The Reserve Bank statements give indicator that their policy of fiscal stimulus will not cease until mid-2010.

For the second review in a row Reserve Bank Governor Alan Bollard has opted not to increase the Official Cash Rate (OCR) of New Zealand. The change came as no big surprise to commentators or market participants, with no movements of particular note to be seen on the foreign exchange or equity market.

In regards to the decision, Alan Bollard, in a Reserve Bank release said “Despite signs of a leveling off in economic activity, the economy remains weak. We continue to expect to see a patchy recovery get underway toward the end of the year, but it will be some time before growth returns to healthy levels.” He went onto say that while most factors seemed to be close to the June Monetary Policy Statement estimates, the level of the New Zealand dollar was cause for some concern at the current time.

The New Zealand OCR as set by the Reserve bank is currently at 2.5%. With an end seemingly in sight for New Zealand and the recession it is now facing, there is no obvious need for further reductions in the OCR, which is already at a record low level.

A survey conducted by Reuters of 16 analysts has resulted in 15 voicing an opinion that there will not be a further cut on the 30th of July. Only one projected a decrease of 25 basis points.

It was voiced that the economy seems to be on the verge of a state of recovery, which entails the Reserve Bank holding some concerns regarding possible side-effects of debt based purchasing as is seen currently in the economy.

Sue Sheldon and Keith Taylor have been appointed as the new directors to the Reserve Bank’s Board of Directors.

Keith Taylor is a Wellington based professional director and a consultant, with a history in the insurance industry and as a chief executive and chief financial officer of Tower. He has also had experience at the Earthquake Commission, Government Superannuation Fund Authority and currently serves as a Member of the Takeovers Panel.

Sue Sheldon is a Christchurch based director and consultant, she is also a chartered accountant. Sue Sheldon has held directorship positions at Smith City Group, Freightways, Contact Energy, and the Wool Industry Network.

New Zealand Prime Minister spoke about, in a Beehive Media Release about the Reserve Bank’s Board’s needs for directors with experience in the field of finance and accounting. He went on to extol the skills of the two chosen candidates saying that they will possess the skills required to help the bank meet its targets and to maintain a sound and efficient financial system.

The Reserve Bank has taken an expected move and once again cut the New Zealand OCR by 50 basis points, bringing it to 3%, from its previous position of 3.5%.

At first glance, the move is a relatively small one, especially since it has been preceded by numerous previous cuts, many of a much greater magnitude. The smaller cuts were driven by the Reserve Bank’s relatively positive future outlook for the New Zealand economy.

It seems that many economists were counting on a higher cut, the level of the New Zealand dollar reflects the fact that a higher cut was expected. Before the announcement, the New Zealand dollar was trading at US 0.5080c, post announcement it was at US 0.5120c. This could also be attributed to the unexpectedly optimistic speech and predictions for the economy made by Alan Bollard during he cut announcement.

At the moment, initial economic predictions for the April and June OCR revisions will be at 25 basis points each, unless the economic situation changes heavily.

The new bank, which is already registered in Australia, is the owner of ANZ National Bank Limited. According to the Reserve bank of New Zealand, the newly formed bank will function in only a limited capacity in New Zealand. It will not commence any commence any retail banking or lending to customers. It is only permitted to purchase mortgages from the ANZ National bank Group. The aggregate value of the held mortgages is not allowed to exceed $15 billion.

With an emphasis on protecting the New Zealand financial system from unforeseen future financial fluctuations or negative situations, the Reserve Bank of New Zealand (RBNZ) has taken measures to ensure a high level of liquidity is available. The new policy is also a response to the more prudent, less liquid attitude of banks in today’s environment.

The RBNZ policy change revolves around the type of collateral that banks may offer the RBNZ. The new inclusions are: securities guaranteed by the New Zealand Government, New Zealand corporate securities with a long-term raring of BBB- or better, New Zealand corporate securities with a short-term rating of A2, F2, P2 or better, and NZD Asset Backed Securities rated AAA, A1+, F1+ or P1.

RBNZ press releases stated that this is to be seen as a temporary measure and that it would have no impact on the monetary policy of the Reserve Bank of New Zealand.

Deputy Reserve Bank Governor Grant Spencer stated in the same release that these changes do not mean that the Reserve Bank would be looking at lending direct to the corporate sector, but as a it would be further included in the banks allowable collateral, the actions would serve to make corporate investment more attractive (and thereby liquid) to banks and portfolio managers.