New Zealand Finance Minister Cullen warned yesterday that the New Zealand economy faces serious challenges and is not immune to the global slowdown.
Last night, RBA Governor Stevens said the exact opposite by indicating that their financial system should be able to weather the storm because Australian banks have very little direct exposures to US subprime problems. Interestingly enough, last night’s economic data suggests otherwise. New Zealand’s trade deficit turned into a surplus for the first time since the 2000 to 2001 recession last month while the current account deficit for the fourth quarter narrowed. Australia on the other hand reported a drop in leading indicators and job vacancies. New Zealand GDP is due for release this evening along with money supply. We expect GDP to be firm given the improvement in trade during the last 3 months of 2007.