'Rock star economy' man sees kiwi staying close to Aussie dollar for some time

HBSC chief economist Paul Bloxham expects the New Zealand dollar to stay strong relative to the Aussie dollar “for some time.”

“It’s an exciting situation if the Kiwi gets to the same level as the Aussie dollar in part because it hasn’t happened for so long,” he told TVNZ's Q+A programme.

Last year, Mr Bloxham gained business press headlines as he coined the phrase 'rock star economy' for New Zealand’s strong economic growth.

He is forecasting an encore this year, saying NZ will remain one of the strongest performing developed economies in 2015

“That’s why we’ve been describing New Zealand as a rock star. It was the fastest growing economy of the 34 OECD economies in the last year. And we think that situation’s going to continue this year as well,” he said.

But Mr Bloxham also warned that there is a down side too:  “It’s going to put some pressure on exporting manufacturers. What’s interesting at the moment, though, is that if you look at the data, actually, most of the exporters are still doing fairly well. 15 of 16 industries all saw an expansion over the past year.”

When asked about the role of foreign buyers in the Sydney and Auckland housing markets, Mr Bloxham said, “It’s very difficult for people to identify exactly how big that role is, partly because we haven’t got very good statistics on foreign purchases of domestic properties. I think the other thing that you’ve got to keep in mind is both of these cities, both Sydney and Auckland, have got very large foreign populations.”

Interest rate cut?
“We’re of the view that the RBNZ is unlikely to cut interest rates this year," Mr Bloxham said. "And, actually, we think on balance the next move for the RBNZ is more likely to be up than down, partly because the housing market, of course, is still picking up very strongly.”

Five-year forecast
When asked to give a five-year forecast, Mr Bloxham said, “Look, I think five years from now you are going to see that New Zealand will have had a slow-down at some point in time. It’s a five-year horizon after all. And Australia, which is showing weaker conditions at the moment, will probably have seen a bit of an upswing.”

The new normal
"Both Australia and New Zealand benefit from the fact that their strongest ties are to the Asian economies, which are the fastest growing economies in the world. This is something that Europe would love to have but doesn’t really have at this point in time. so we are very fortunate," the HSBC economist said.

"It is the new normal that Asia is going to be the fastest growing part of the global economy.

"China is still catching up on Western living standards and still has a long way to go, and it’s not just China. It’s a whole range of other Asian economies as well. And again, we are running on the coat-tails. We get to run along this story, and we get the positive support from demand for our various products.

"In Australia’s case, it’s been hard commodities, and it probably will be soft commodities further down the track. In New Zealand’s case, it’s been dairy products and tourism. In particular, you’re seeing a very sharp rise in Chinese arrivals into the New Zealand economy at the moment because of tourism."

Watch the full interview here.