New Zealand Australia slides 2009

New Zealand Australia slides 2009

Both Countries Grew Strongly over the Decade Australia stronger, but not by much GDP growth % yoy % yoy 6 6 Australia 4 4 2 2 New Zealand 0 0 -2 -2 96 98 00 02 04

06 But Australia Experienced Much Stronger Terms of Trade which fell in the crisis, but by less Terms of trade Index 1990 Q1 = 1000 Index 1990 Q1 = 1000 1800 1800 1600 1600 Australia 1400 1400 1200 1200 1000 New Zealand 1000 800

800 600 600 00 02 04 06 08 Both Countries Financial Systems Weathered the Crisis Well with similar institutions and policies Basis Points 300 Credit default swap spreads 250 Basis Points 300 250 New Zealand 5 year CDS spread 200 200 150

150 100 100 Australian 5 year CDS spread 50 0 Jul-08 50 0 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Strong Chinese Growth Assists Australia more than most countries Exports to China (% of total) Source: Grattan Institute Exports share for Chinas domestic use Australia Is Investing Heavily In Minerals

encouraged by new finds, strong prices & bottlenecks Capital investment by the Australian mining industry Source: Grattan Institute Australian Future Growth Potential Looks Very Strong due to investment, population growth, terms of trade, & stimulative policies Estimates of potential output growth % 4 Australia OECD average 3 2 1 0 2006-2008 Source: OECD 2009-2010 2011-2017 NZ also Stimulated the Economy but growth went negative & pick-up slower GDP growth % yoy 6 % yoy

6 RBNZ forecasts Australia 4 4 2 2 New Zealand 0 0 -2 -2 -4 -4 06 07 08 09 10 But Financial Markets View the Countries Similarly despite different growth & inflation forecasts Official cash rates

% 10 Market expectations % 10 8 8 6 6 Australia 4 4 2 0 Jan-08 New Zealand 2 0 Jul-08 Jan-09 Jul-09

Jan-10 Jul-10 And this is Particularly so in FX Markets where the cross-rate is very stable Exchange rates Index Index 1.2 1.2 1.0 1.0 AUD/USD 0.8 0.8 0.6 0.6 0.4 0.4 NZD/USD 0.2 0.2 0.0

0.0 90 92 94 96 98 00 02 04 06 08 Despite NZ Economy being more Vulnerable manufacturers & services have a bigger share of exports Non-commodity exports % of GDP 20 % of GDP 20 16 16 New Zealand 12

12 8 8 Australia 4 4 0 0 91 93 95 97 99 01 03 05 07 09

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