Reflections on the stewardship
of the Reserve Bank
A speech delivered to The Northern Club in Auckland
On 30 August 2017
By Graeme Wheeler, Governor
Thank you for the invitation to join you, it's a pleasure to speak again at the Northern Club.
Today, I will offer thoughts on the stewardship of the Reserve Bank over the past five years
in meeting its price stability and financial stability objectives, and discuss some policy
challenges the Bank may face in the future.1 It's been a remarkable five years, especially
with the challenges thrown up by the global economy and an over- heated domestic housing
market.
1. A challenging international and domestic environment
As a small open economy, developments beyond our shores have a large influence on New
Zealand's economic outcomes. The global expansion, which is about to enter its ninth year,
is the weakest in 70 years. Until recently, output growth in the advanced economies has
been below trend, and headline and core inflation continue to be low despite unprecedented
monetary stimulus.
Several factors account for the weak recovery: corporate and household deleveraging
following the Global Financial Crisis (GFC) has been more prolonged than expected -
especially in the euro area; productivity and business investment in the advanced economies
have been weak; and trade has been much less of a catalyst than normal. Increasingly, the
gravitational centre for the global economy is shifting away from the US and Europe to the
East Asia region.
Each five year window brings its own set of risks and challenges. Over the past five years
on the international front we've seen:
•
Increasing use of unconventional monetary policies (including negative interest rates and
unprecedented amounts of quantitative easing) to deliver the cheapest financing the
world has experienced.2 While aimed at stimulating spending, it also led to rapid
increases in asset valuations (bonds, equities, and real estate) and a sharp compression
in credit spreads and risk premia.
•
The largest slowdown in global trade since the early 1980s, which has seen countries
seeking to boost domestic growth through lower exchange rates.3
• Sharp swings in commodity prices with peak to trough movements of 75 percent in oil
and other commodities.4
•
A continued build up in global debt that is now at record highs relative to global output.5
•
Unexpected political developments in Europe, the UK and the US that substantially
increased uncertainty, although measures of financial market volatility remain close to 25
year lows.6
Back home, New Zealand experienced:
•
The strongest migration surge since the 1860s (equivalent to a 6 percent increase in the
working-age population since 2012) and the labour force participation rate reached
8
historically high levels.7
•
A long period of negative tradables inflation - probably the longest since the Great
Depression.9
•
A 75 percent decline in dairy prices before recovering partially.10
• A major switching of expenditure and production to the non-tradables sector, in part to
free up resources for the Canterbury rebuild.11
•
Annual house price inflation that reached 30 percent in Auckland and spread rapidly
throughout the country.
In a world of unconventional monetary policy and unprecedented liquidity, investors' bid up
asset prices and, in doing so, compressed risk premia. In these settings, New Zealand, with
its stronger output growth, higher interest rates, and impressive international rankings on
numerous business and governance-related surveys attracted portfolio flows from the rest of
the world.12,13 These flows put upward pressure on the exchange rate, and lowered long
term interest rates.
The appreciating exchange rate made it more difficult for our exporters to compete on global
markets (if not matched by rising export prices) and skewed growth away from the tradables
sector. By lowering tradables inflation, it also increased the risk that headline inflation would
remain low and feed through into falling long-term inflation expectations. Lower long term
interest rates reduced the funding costs for New Zealand banks and led to historically low
mortgage rates. These, in conjunction with constraints on housing supply and strong
population growth, stimulated rapid house price inflation-initially in Auckland and later across
the country.
2. New Zealand's Recent Macro-Economic Performance
Despite the difficult international backdrop, New Zealand's economy has generally
performed well over the past five years. As shown in table 1, compared to the period 1990 -
2012 (that is the 22 year period since flexible inflation targeting was first introduced) the five
years from the beginning of 2013 have seen slightly faster GDP growth and much stronger
employment growth. Over the past five years, headline CPI inflation has been weaker, our
current account deficit has been smaller as a share of GDP, while the unemployment rate
has been around its average for the period since the mid-1990s even with record increases
in migration and labour force participation. Labour productivity has been disappointing, a
challenge we share with many other advanced economies.14
Some of these outcomes lie well beyond the influence of the Reserve Bank's policy levers.
For example, monetary policy cannot directly influence the supply of labour, the productivity
of labour and capital, the innovation that takes place within the economy, or the country's
external position.
Table 1: New Zealand Indicators (annual average percentage change)
Global GDP NZ's Real Employment Headline Core
Growth GDP Growth Growth Inflation Inflation
1990 - 2012 3.6 2.6 1.6 2.5 2.215
2013 - current 3.3 2.8 2.5 1.0 1.4
Stats NZ, RBNZ estimates, IMF World Economic Outlook
Source:
Over the past five years, the Bank's monetary policy has been an important driver behind the
rate of output and employment growth, and the path of non-tradable inflation and inflation
expectations. During this time monetary policy has been stimulatory, with the Official Cash
Rate averaging 2-3 percentage points below the neutral interest rate (the interest rate at
which monetary policy is neither stimulatory nor contractionary). Monetary policy isn't
however, the only driver of growth in output and employment - the pent up demand for
investment in construction and infrastructure, the rise in the terms of trade and the rapid
increase in population are also important factors.
Our low annual rate of headline inflation (1 percent over the past five years) has mainly been
due to the 41⁄2 years of negative tradables inflation experienced from mid-2012 until
late2016. Tradables inflation, much of which lies beyond the Bank's control, averaged minus 1.2
percent during this period. Annual non-tradables inflation, which the Bank has considerable
influence over, averaged 2.3 percent since 2013 and core inflation averaged 1.4 percent and
remained within the 1 to 3 percent target band established for headline inflation.16
Looking at the key relative prices in the economy we would have preferred a lower exchange
rate over this period. The TWI remains 4 percent higher than it was prior to the seven cuts
in the Official Cash Rate that commenced in June 2015. To a large extent the high
exchange rate reflects the favourable performance of the economy, the high terms of trade,
and weakness in the US dollar. The appreciation in the exchange rate has been a headwind
for the tradables sector and, by reducing already weak tradables inflation, made it more
difficult to reach the Bank's inflation goals. A lower New Zealand dollar is needed to increase
tradables inflation and help deliver more balanced growth.
3. The impact of Macro-Prudential Policy
With low interest rates unable to constrain credit growth, rapid house price inflation was
creating financial stability risks for the banking system and, given the very high levels of
household debt, increasing the risk that a rapid fall in house prices could have a severe
economic impact.
We were conscious that the introduction of LVR restrictions would make life difficult for the
Bank, given the sensitivities around housing.
Loan-to-value ratio restrictions (LVRs) reduced the systemic risk to the banking system
flowing from the rapid increase in house prices. Requiring new borrowers to have a greater
equity contribution in their house purchases reduced the overall riskiness of banks' mortgage
portfolios.
When LVRs were introduced in October 2013, 21 percent of the stock of mortgage lending
across the banking system was at LVRs of 80 percent or higher. With a third of new
mortgage lending at that time taking place at LVRs of 80 percent or higher, the overall stock
of high LVR mortgages was likely to approach 25 percent. As a result of the LVR restrictions,
the stock of highly leveraged loans across the banks' mortgage portfolios is now around 8
percent.
Figure 1: LVR policy continues to strengthen bank balance sheets
High-LVR share of bank's residential mortgage portfolios
Introduction of
restrictions on
high-LVR
lending
Source: Registered banks' Disclosure Statements, RBNZ Lending Position Survey
Some commentators expected the LVR restrictions to fall heavily on first home borrowers.
While some first home buyers wanting high LVR loans have been affected by the
restrictions, banks have given priority to first home buyers within their 10 percent speed limit.
Figure 3 shows that over the past 21⁄2 years the share of first home buyers in real estate
transactions has been around 21 percent-its level in early 2013. Over this period, first home
buyers have taken out nearly $21 billion of mortgage loans from the banking system, with 28
percent of that lending at LVRs greater than 80 percent.
Figure 2: Share of house sales by buyer- type
Core Logic
Source:
It's encouraging that nation-wide annual house price inflation has fallen from its peak of 21
percent in August 2015 to 1 percent currently (figure 4). Several factors contributed to the
slowdown including the tightening of investor LVRs in October 2016, more restrictive lending
conditions by banks, the rise in mortgage rates in early 2017 and increasing concerns about
housing affordability.
Figure 3: Annual house price inflation
% %
40 40
Auckland
Rest of New Zealand
30 30
20 20
10 10
0 0
-10 -10
-20 -20
2000 2003 2006 2009 2012 2015
Source: REINZ
LVR policy has been aimed at reducing financial stability risks as house prices became
increasingly stretched. LVRs are not expected to be a permanent measure and the
conditions for their removal would be: signs that financial stability risks have eased; and a
degree of confidence that these risks won't worsen again when LVRs are removed.
On the former measure, the financial risk picture is improving. Banks are carrying a lower
share of high LVR mortgages as a result of the LVR limits having been in place, and the
slowdown in house price inflation is positive - although prices remain very elevated relative
to incomes and rents.
However, the underlying drivers of housing demand (population growth, low interest rates)
remain strong with housing demand still outstripping supply. There is a risk of a housing
market resurgence (and a sharp lift in high LVR lending) if LVRs were removed at this time.
The Bank will continue to review developments, bearing in mind that removal could be made
in stages as a safeguard to a resurgent market.
4. The outlook for the New Zealand Economy
In the absence of major unanticipated shocks, prospects look promising for continued robust
economic growth over the next two years. If this occurs, the current expansion would be the
longest in 50 years17. Our forecasts suggest that GDP growth will exceed the growth rate of
potential output and be driven by continued accommodative monetary policy, population
growth, high terms of trade and, in the outer period, by the budgetary stimulus announced in
the 2017 Budget. A positive output gap is forecast with inflation gradually approaching the
mid-point of the target band.18
i) Domestic risks
The main domestic risks we face lie with migration and the housing market.
A sharp decline in net immigration
Since early 2012 net permanent and long-term working age immigration has totaled
220,000 - equivalent to a 6 percent increase in the working age population. Migrants
have mainly been in the 15-29 year age group. This migration has increased the
demand for housing and goods and services, while also increasing labour supply
(and hence potential output). Migration has had a positive net demand effect,
although its impact has been weaker than in previous migration cycles, and is one
factor moderating wage outcomes.
Our forecasts assume net immigration of 140,000 people over the next three years -
a further 3.5 percent boost to the working age population. A much sharper reduction
in arrivals or increase in departures, absent an increase in global growth, would slow
domestic economic growth by reducing employment and demand growth.
A resurgence in house price inflation
House price to income ratios are high in New Zealand, and especially in Auckland.
Although house price inflation has slowed markedly, a further surge in house prices
can't be ruled out as mortgage rates are low, net migration flows are strong and
large supply and demand imbalances remain in the housing market.
A strong resurgence in house price inflation would increase the risk of a subsequent
future correction. With a debt to income ratio of 167 percent (up from the 2009 peak
of 159 percent) households are already heavily exposed to the risk of rising interest
rates or falling house prices. In addition, the share of high Debt-to-Income (DTI)
lending to first home buyers, other owner occupiers and investors is high, making
borrowers more vulnerable to rises in interest rates and/or reductions in income (e.g.
associated with unemployment). This increases the risk of forced sales in a
downturn leading to falls in house prices and flow-on effects on bank balance sheets
and the broader economy. This is why we have been consulting on whether a DTI
instrument should be included in the macro-prudential toolkit. We wouldn't seek to
use it while the housing market continues to moderate.
Figure 4: Share of New Lending with High DTI Ratios
(June 2017 month)
Source: RBNZ
ii) International risks
Other than unanticipated major geo-political developments, the main risk on the international
side lies with the build-up of global debt.
If one examines why the large advanced economies move into recession it has generally
been because of inflationary shocks (and the policy response to them) or problems in their
financial sectors. For example, since the early 1970s the US economy has experienced five
recessions. Three had their origins in sharp spikes in oil prices, and the last two resulted
from asset price corrections that affected financial market stability.19
The likelihood of central banks having to lean hard against a rapid burst in global inflation
looks to be low. Structural factors are playing a dominant role in the low inflation
environment. These factors include: ongoing declines in the cost of information technology
and capital goods; increasing global competition in the services sector (e.g. in education,
health care, construction, retailing and distribution); the emergence of the gig economy;20 the
technological revolution in the oil and gas industry that has dramatically lowered production
costs and enabled new sources of supply; and the wage moderation that is taking place
across the advanced economies. Wage moderation seems to be linked to several factors,
such as the diminished bargaining power of labour, technological change, global
outsourcing, demographics, and changes in labour market composition.
The greater risk lies in a large correction in asset prices that leaves investors with little or no
equity in their investments at a time when the broader economy is under pressure. Two
aspects are of concern in this regard:
•
The global stock of non-financial sector debt is at a historical high of 220 percent of GDP
- up from 180 percent in 2007.
Table 2: Non-financial sector debt as a share of GDP (%)
2007 2016
Total (share of global GDP) 180 220
Advanced Economy (share of AE GDP) 235 270
Emerging Market Economies (share of EE GDP) 110 175
Source: BIS
Most of the growth in debt has occurred in the emerging markets especially on the
corporate side (which has increased from 55 percent to 95 percent of EE GDP) and
household sector (from 20 percent to 35 percent). Most of the growth in advanced
economy debt occurred in the general government sector - which rose from 70 percent
to 115 percent of AE GDP).
•
Asset valuations (e.g. fixed income, equities) are high relative to a variety of
benchmarks. Whether current prices represent fair value depends a great deal on the
outlook for future inflation and interest rates, particularly in the advanced economies.
On this front, financial markets remain confident that central banks will continue to maintain
highly stimulatory monetary policy settings for the foreseeable future. Measures of financial
market volatility remain close to historic lows. However, investors are acutely conscious that
the major central banks are large holders of long- dated Government securities, (and some
have corporate debt and equities in their portfolios), and are highly attuned to any hint of a
possible tightening in policy rates or winding back in the scale of quantitative easing.
If growth in the global economy slows because of debt-related or other issues, our economy
will be affected. However, there is scope to help buffer against such shocks. We have
greater room for monetary policy manoeuvre than central banks in many advanced
economies. Our Official Cash Rate is 1.75 percent - above the zero and negative policy
rates of several advanced country central banks - and the Bank has not grossed up its
balance sheet by buying domestic assets. Similarly, with budget surpluses and low net
Government debt relative to GDP, the Government has flexibility on the fiscal policy side.
5. New Zealand's Monetary Policy Framework
i) Flexible inflation targeting remains highly relevant
Flexible inflation targeting was introduced by the RBNZ in 1990 and has been adopted by
most central banks in the advanced economies and several emerging market economies.21
With inflation below target in nearly all advanced economies, there have been questions
from time to time whether flexible inflation targeting is still an appropriate framework for
monetary policy.
We believe that it is still the best monetary policy framework for New Zealand. It has helped
to deliver low inflation while enabling the Bank to take account of domestic and external
developments in framing its monetary policy responses. No country has abandoned flexible
inflation targeting, nor has any country adopted nominal income targeting or price level
targeting that are sometimes suggested as alternatives.22
ii) Maintaining flexibility in specifying the inflation goal
Central banks make monetary policy decisions by drawing on the data available, research,
models, forecasts and judgement. At a technical level it involves estimating potential output,
output gaps, and the neutral interest rate, and assessing the transmission mechanisms
through which interest rate changes affect output growth and inflation, and the time lags
involved.
Structural changes in the economy can have important effects on factors that are central to
monetary policy decision making. We've seen the relationship between the output gap and
inflation change with Philips curves flattening across the advanced economies, even in
countries with rapid employment growth and low unemployment rates. The fact that the
Reserve Bank has much less control over tradables inflation did not matter as much when
the annual percentage change in import prices in world terms was 2.6 percent in the five
years prior to the GFC, but it does when they have averaged minus 1.4 percent since March
2013.
The specification of a target range for CPI inflation should be the main focus of the Policy
Targets Agreement (PTA). It's important that the PTA also recognise that several factors
can cause inflation to move outside the target range and require the Bank to provide
analysis and explanations in the Monetary Policy Statement when this occurs. Specifying a
single inflation rate that the central bank should seek to achieve at all times should be
avoided - it suggests a spurious accuracy that central banks are unable to deliver. A
reference to the mid-point of the target range however, is appropriate - our research
23
indicates this was a useful factor in reducing inflation expectations.
Some offshore commentators have suggested that central banks should raise their inflation
targets, perhaps to around 4 percent, in order to move policy rates away from the effective
lower bound and give central banks more policy flexibility to respond to any marked
slowdown in activity. It is not clear that central banks could readily increase inflation to these
levels and attempting to do so would further stimulate asset markets, at least in the short
run. Raising an inflation target when productivity growth is weak makes little economic
sense.
Some have suggested that the inflation goal should be specified in terms of core inflation
rather than headline CPI inflation. A CPI benchmark has many benefits - it's easier to
communicate because it more closely resonates with people's experience of living costs,
and headline CPI inflation affects real rates of return and real wage outcomes that in turn
influence household labour supply and spending decisions.
iii) The importance of continually reassessing policy settings
Monetary policy decisions involve balancing various risks facing the economy, while
recognising that inflation outcomes and policy choices are often shaped by decisions that lie
beyond the influence of the central bank.
Inevitably, central bank forecasts and assumptions require modification as new information
becomes available. For example, the Bank raised the OCR four times in the first half of
2014. At that time the IMF were forecasting higher global growth and the New Zealand
economy was growing rapidly, with the latter due to the terms of trade being at a 40-year
high, strong construction activity, rising net immigration and highly accommodative monetary
policy. We forecast a positive output gap and rising inflationary pressures. This view was
shared by private sector forecasters and the IMF, and market pricing built in increases in the
OCR.
By late 2014, the global economy was not strengthening as anticipated, oil prices had almost
halved since June 2014 and whole milk powder prices were down by 40 percent. Faced
with the prospect of a weaker economy and lower inflation pressures, the Bank moved to a
neutral bias and then began the first of seven OCR cuts in June 2015.
Central banks do not expect to be able to accurately forecast commodity prices. What
matters is that central banks make sensible decisions on the basis of the information
available, reflect carefully on the views held by financial markets and key institutions, remain
open-minded, carefully assess new information as it becomes available, and change their
forecasts and policy settings when it considers it appropriate. We are satisfied that the Bank
met these tests.
iv) Macro-prudential policy is valuable in addressing financial stability risks
Experience in several countries indicates that monetary policy is generally not a good
vehicle for leaning against inflated asset prices. In these situations interest rates would have
to increase very substantially in order to dampen asset prices and the rise in interest rates
could do substantial damage to the economy by depressing spending, reducing risk taking,
and undermining the competitiveness of the tradables sector.
Prudential and macro-prudential policies can play a valuable role in reducing the systemic
risks to the banking system associated with inflated asset markets. We are likely to see
macro-prudential instruments become even more important and widely deployed by
countries in years to come.
6. Prudential regulation
On the prudential side, over the last five years we tightened prudential standards, adjusted
inefficient or poorly targeted regulation and took steps to lower compliance costs. We
completed the licensing of nearly 100 insurers. A year-long review of bank regulation, with
a particular focus on policy development and regulatory processes, was undertaken with
extensive consultation with the banking sector. We clarified and tightened the policy on
outsourcing of banks' key functions and systems, and obtained Government approval for the
regulation of key financial market infrastructures. We are currently reviewing the quality of
bank capital instruments and assessing whether banks are adequately capitalised, and
reviewing the effectiveness of the Insurance (Prudential Supervision) Act, 2010.
The IMF's Financial Sector Assessment Programme (FSAP) conducted last year identified
the types of banking sector risks (high exposure to housing and inflated house prices, heavy
reliance on external funding, exposure to commodity price fluctuations) that are regularly
discussed in our Financial Stability Reports. It concluded that the banking system is well
placed to withstand large but plausible shocks, as judged by a range of stress tests.
However, the IMF recommended, among other things, strengthening the macro-prudential
regime to include a debt-to-income instrument, and addressing weaknesses in the approach
to financial market infrastructures regulation and bank crisis resolution. There were no
particular surprises in the IMF's recommendations, although they did comment that the Bank
is not adequately resourced to support its existing low-intensity approach to banking
regulation and supervision. We are reviewing the IMF's recommendations.
7. Operational business
In addition to meeting its responsibilities in respect of price stability and financial stability, the
Bank manages a $27 billion balance sheet and runs several businesses that include treasury
operations, payments systems, and currency and custody management. These businesses
are undergoing major technology renewals and/or changes to their business models. A
highlight of the last five years was the delivery of a new series of bank notes with enhanced
security features that were well-received by the public and international bank note
producers. A disappointing element was the failure of negotiations to sell New Zealand
Clear.
Considerable emphasis has been placed on increasing the management strength across the
Bank, benchmarking performance, testing back-up systems with the Auckland office and
managing enterprise risk. This emphasis is essential as the Bank has broad responsibilities,
conducted with only 260 staff, and needs to manage multiple business and policy-related
risks.
Concluding Comments
Every five year window brings its own set of challenges. On the international front we've
seen increasing use of unconventional monetary policies, sluggish international trade, sharp
swings in commodity prices, a continued rapid build-up in global debt, and unexpected
political developments in Europe, the UK and the US.
Back home we've experienced the strongest migration surge since the 1800s, probably the
longest period of negative tradables inflation since the Great Depression, a 75 percent
decline in dairy prices before recovering, a major shift in resources to the non-tradables
sector to support the Canterbury rebuild, and annual national house price inflation reached
21 percent.
Despite these challenges, the New Zealand economy has generally performed well during
this time. Since 2012, GDP growth has averaged 2.8 percent and employment growth 2.5
percent. Both exceed the trend rate of growth. Headline CPI inflation averaged 1 percent
due to 41⁄2 years of negative tradables inflation, while core inflation averaged 1.4 percent.
Over the past five years, the Bank's monetary policy has been an important driver behind the
rate of output and employment growth, and the path of non-tradable inflation and inflation
expectations. Long term inflation expectations remain well anchored at the target mid-point
of 2 percent.
We have also had a stable financial system. Nationwide annual house price inflation has
declined to 1 percent due to LVR restrictions, the tightening in bank lending, the rise in
mortgage rates and increasing concerns about housing affordability. LVR restrictions have
been effective in reducing financial stability risks as house prices became increasingly
stretched.
LVRs are not expected to be a permanent measure, but their removal would require a
degree of confidence that financial stability risks won't deteriorate again. However, debt to
income ratios have risen in recent years, and with the underlying drivers of housing demand
(population growth, low interest rates) remaining strong and demand outstripping supply,
there's a risk of a housing market resurgence (and a sharp lift in high LVR lending) if LVRs
were removed at this time.
In the absence of major unanticipated shocks, prospects look promising for continued robust
economic growth in New Zealand over the next two years. The greatest risk we face at this
stage relates to the inflated global asset prices and the continuing build up in global debt.
If growth in the global economy slows, we have some scope to buffer our economy. We've
greater room for monetary policy manoeuvre than central banks in many advanced
economies. Our official cash rate is 1.75 percent - above the zero and negative interest
rates of several advanced country central banks - and the Bank has not grossed up its
balance sheet by buying domestic assets. With a budget surplus and low net debt relative to
GDP, there's also flexibility on the fiscal policy side.
I wish to thank the Board of the Bank for their intensive scrutiny, support and advice over the
past five years. The Board plays a critical role in monitoring the performance of the Bank
and the Governor. I have been fortunate to work closely with three excellent and insightful
chairs in Dr Grimes, Dr Carr and Dr Quigley.
Above all, I wish to thank my colleagues in the Bank. It has been a great pleasure to work
with my fellow governors on the Governing Committee and with the Senior Management
Group. The fact that the Bank continues to maintain a strong international reputation is due
to the high calibre, dedication and commitment of colleagues throughout the institution.
1
The Reserve Bank is mandated by the Reserve Bank of New Zealand Act to contribute to
New Zealand's economic growth by maintaining stable prices, promoting financial systems
soundness and efficiency, and meeting the currency demands of the public
2
Major central banks in advanced economies have conducted around USD12 trillion of
quantitative easing since 2008. Countries whose central banks currently have their main
policy rate below 1⁄2 percent, account for around 1/3rd of world output.
3
Merchandise trade growth over the 5 years to 2017 was the slowest period of 5 year growth
since the early 1980s. Protectionist measures and trade disputes in 2016 were at their
highest level since the GFC.
4
The price of Brent Crude averaged USD 115/barrel from early 2011 to mid-2014 and fell to
USD 28/barrel in January 2016. Over the past 12 months it has averaged around USD
50/barrel.
5
Global non-financial sector debt was 220 percent of global GDP in 2016, up from 180
percent in 2007.
6
Financial market volatility remains close to historic lows in equity, bond and fx markets (as
shown by the MOVE index of US Treasury options, the VIX index of S and P options and the
CVIX index of FX options).
7
Net permanent long-term migration of working age entrants has totalled 220,000 since
2012. This is equivalent to a 6 percent increase in the working-age population.
8
The labour force participation rate currently stands at 70 percent. The participation rate
over the past 25 years has averaged 67 percent.
9
Tradables inflation was negative over the period 2012 Q2 to 2016 Q4, and averaged minus
1.2 percent per annum during that time.
10
Whole milk powder prices fall from USD 5208 per metric tonne in October 2013 and fell to
USD 1590 per metric tonne in August 2015. They have averaged around USD 3100 per
metric tonne in 2017.
11
The cost of Canterbury reconstruction following the four earthquakes is expected to be
around NZD 40 billion in 2015 dollars. The insurance payout, expected to be around NZD
36 to 40 billion, is the 5th largest global insurance payout.