New Zealand poised to raise interest rates as economy booms
Strong demand from China for agricultural products and rebuilding after the 2011 Christchurch earthquake push New Zealand's GDP growth to 3.5 per cent
New Zealand is poised to become one of the first developed nations to begin raising interest rates after the global financial crisis, in response to a thriving economy.
The South Pacific nation of 4.5 million is benefiting from huge demand in China for its milk products and from the gathering pace of reconstruction in Christchurch, where a 2011 earthquake destroyed much of the southern city’s downtown area.
The improving economy also seems to be slowing the exodus of residents to Australia, which boasts higher living standards than New Zealand and weathered the financial crisis better than almost every other nation thanks to a mineral boom driven by demand from China. But Australia’s economy has begun slowing, just as New Zealand’s takes off.
Economic growth has reached a healthy annual rate of 3.5 per cent, better than most developed nations, and the trend is expected to continue. In its 2014 outlook, the Organisation for Economic Co-operation and Development (OECD) predicted New Zealand’s GDP will expand by 3.3 per cent, more than the 2.9 per cent in the US, 2.6 per cent in neighbouring Australia, and 1 per cent in the euro area.
Reserve Bank of New Zealand Governor Graeme Wheeler said on Thursday that New Zealand’s growth has “considerable momentum” and the bank expects to begin raising its benchmark interest rates “soon” from a record low of 2.5 per cent. Most economists predict rate hikes will begin in March and continue throughout the year.
