Risk warning for NZ economy

New Zealand's economy is relatively risk-free but its position is getting worse because of declining export prices and high unemployment, commercial analysis company Dun & Bradstreet says.

According to D&B's Global Risk Indicator – which analyses the political, commercial, economic and external risk of doing business in 132 countries – 56 nations have had their risk rating downgraded over the past three years.

Twenty-three had their risk rating upgraded.

New Zealand's risk rating has not been downgraded since 2011, and while it is rated low-risk, its risk profile is getting worse because of declining export prices and unemployment rising to 7.3% late last year.

D&B's New Zealand general manager Lance Crooks says the deteriorating risk profile is concerning, despite good economic conditions locally.

"New Zealand's exposure to world markets means that external developments will have a knock-on effect on the domestic economy.

"In light of the high number of downgrades globally, a full economic recovery from the 2008-09 crisis remains uncertain.

"As such, the possibility of a further downgrade cannot be ruled out," Mr Crooks says.

Nearly half of the total risk downgrades in 2012 were in the struggling eurozone and half of its countries received at least a downgrade last year, including Germany, France, Switzerland, Spain and Greece.

Mr Crooks says for many countries, recovery from the global financial crisis is especially difficult, particularly in volatile eurozone countries.

"Normally, this far into the recovery we would expect the figures to be reversed, with a large number of upgrades and only a few downgrades.

"Given the current track record, it's improbable that the world economy will resume pre-GFC growth levels until at least 2017."

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4 Comments & Questions

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Why are stockmarkets where they are, then? Will they reverse?

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Dont forget New Zealand's ballooning sovereign debt, whereby it borrows $300m every week to balance the books.

Standard & Poors and Moody's will be watching ready for a further sovereign credit downgrade.

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There is a fundamental flaw in the concept of year-on-year growth. The simple fact is that in order for us to sustain growth indefinitely one must have inflation to have that growth. The growth politicians and economists talk about is exponential by nature. Therefore, a 2% growth today in 10 years is equal to 122% of today's dollars. You will never maintain that unless you debase the currency. Inflation is a politician's best friend.

What we need is a sustained period of contraction/deflation.

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The politicians keep fooling us that we are OK. Rubbish! We are on a slippery slope and the sooner we face up to this the better. When the going gets really tough John Key will put on his cheesy smile and make his way off out of NZ (probably with some sort of gong to his name) and his flock of wimpy followers will be left floundering. It's a disgrace the way this small country is being administered. There is no growth and no direction. The only things that are flourishing are the welfare system and the Maoris and the bureaucrats (including MPs) lining their own pockets.

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.7739 -0.0008 -0.10%
AUD 0.9503 -0.0001 -0.01%
EUR 0.6316 -0.0020 -0.32%
GBP 0.4955 -0.0002 -0.04%
HKD 6.0020 -0.0053 -0.09%
JPY 92.6960 0.1120 0.12%

Commods

Commodity Price Change Time
Gold Index 1195.4 -2.890 2014-12-19T00:
Oil Brent 61.4 1.580 2014-12-19T00:
Oil Nymex 57.1 2.910 2014-12-19T00:
Silver Index 16.0 0.096 2014-12-19T00:

Indices

Symbol Open High Last %
NZX 50 5527.8 5553.7 5527.8 0.25%
NASDAQ 4759.0 4779.2 4765.4 0.12%
DAX 9827.3 9924.0 9787.0 0.81%
DJI 17812.2 17911.6 17804.8 0.49%
FTSE 6545.3 6620.9 6545.3 0.48%
HKSE 23264.0 23478.9 23116.6 1.26%
NI225 17685.5 17692.6 17621.4 0.08%