May 27 issue of the BNZ Weekly Overview

Welcome to the May 27 issue of the BNZ Weekly Overview

WOMay27.pdf

I am in Brussels at the moment and it is interesting to be in the most financial disturbed part of the planet at the moment. It is very unclear when this current period of uncertainty about European government debt management will end and very unclear to what extent it will spill over into a new banking crisis because of the exposure of European banks to European government bonds. For now the risk seems to be that things get worse before they get better and although various forecasters remain confident of positive growth near 1% for the EU this year, and a tad better next year.

For NZ the main implications of what is happening over here are high currency volatility continuing in the short term because of our classification as a risky currency, downside risk to exports to the EU and UK, plus tightening credit availability once again because interbank markets are again contracting in Europe.

Best Regards

Tony Alexander
Chief Economist

Bank of New Zealand

ENDS

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