Treasury says it notes concerns about the sustainability of commodity prices and it will be hard for New Zealand to maintain its current merchandise trade surplus.Commodity exports are benefiting from rapid price growth and have helped push the merchandis
Treasury says it notes concerns about the sustainability of commodity prices and it will be hard for New Zealand to maintain its current merchandise trade surplus.
Commodity exports are benefiting from rapid price growth and have helped push the merchandise trade surplus to its highest level in 16 years, Treasury said in its economic indicators report for November.
"Maintaining that surplus will be challenging as there is limited capacity to increase agricultural volumes in the short-term and imports are likely to increase as consumption and investment strengthen over the year ahead.
"In addition, a number of risks to export volumes emerged over the month including drought and the kiwifruit vine disease, psa," Treasury said.
Concerns about the sustainability of commodity prices also intensified during the month as China acted to curb rising inflation and the stability of the euro area came under question.
Treasury also notes that much of the demand for labour over the past year has come from the primary industries and from education, but said a labour market recovery is expected to continue at a moderate pace in 2011.
Household credit growth was flat in October and house prices edged lower, suggesting that household spending remains conservative and that the economy will need to rely on other sources of expenditure to drive growth.
"Businesses remain reluctant to increase their exposure to debt, although there are encouraging signs of a lift in credit growth and rising business confidence points to a more vibrant economy over 2011," Treasury said.
