Economy flat but improving - Treasury
Expects quake-related insurance inflows to produce a current account surplus for the first time in 37 years.
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Treasury detects weakness in the economy and a less positive tone in business opinion but is expecting insurance inflows to produce a current account surplus for the first time in 37 years.
Developments in March confirmed Treasury's view that the economy was considerably weaker over the second half of 2010 and early 2011 than expected, Treasury said in its March Economic Indicators report. "Lower than expected household spending on consumption goods and housing were the main drivers of the weaker outturn, with some offset from stronger exports," Treasury said.
Treasury's forecasting team met with around 30 businesses in Auckland and Wellington in March but cancelled visits to Christchurch because of the February 22 earthquake. It last talked to businesses in September.
"These business talks were clearly less positive than our last talks in September 2010. Earthquake effects had a large influence on the sentiment of the firms that we visited," Treasury said.
Trading conditions could be summarised as flat, it said.
"Some businesses commented that activity had been picking up through the early part of 2011, but the February 22 earthquake had dented confidence to such an extent that business activity had since slowed noticeably."
Exporters were positive and the country's strong export performance was being reflected in external accounts, which posted the largest goods surplus in a decade.
"The external accounts are also benefiting from reinsurance inflows arising from damage caused by September's earthquake."
Inflows were revised up to $3.6 billion from $1.7 billion in the December current account and Treasury expects the March accounts will include initial estimates of the value of reinsurance claims from February's earthquake.
"Over time we expect the combined value of reinsurance inflows to rise to around $9 billion, sufficient to push the current account balance into surplus for the first time in 37 years."
NZPA and NBR staff
Tue, 05 Apr 2011
Tue, 05 Apr 2011
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Economy flat but improving - Treasury
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