zealand dollar price of things which could be exported, such as milk and meat, because the prices of goods of this kind are also directly affected by the depreciation of the exchange rate. ) these price rises will not happen instantaneously, particularly where importers and exporters have covered their foreign exchange risk in the forward market. to the extent that that has happened, it will take a little while for the new zealand dollar prices of imports and exports to go up. but go up they certainly will. ( not all of those price increases will reach consumers in full, however, if some of the price increases are absorbed out of the margins of foreign exporters or local importers and distributors. moreover, a decline in the quality of some goods, difficult to measure accurately in the cpi, may also mask effective price rises. ) the effect of these relative price changes - where the prices of imports, import substitutes, and exportable goods and services go up relative to the prices of things which can only be traded within the new zealand economy - will be to increase the income of those of us producing goods and services which are exportable, or which compete with imports, relative to the rest of us. and in that sense the lower exchange rate can be seen as a healthy development. it is the floating exchange rate at work, encouraging the production of goods and services which will reduce our balance of payments deficit and discouraging the consumption of goods and services which are imported or could be exported. to the extent that the low exchange rate persists, and is not negated by higher domestic inflation, this is likely to see stronger growth in exports of goods and services, slower growth in imports of goods and services, and a reduction in new zealand ’ s balance of payments deficit on current account. and happily, unlike many of the countries which saw bank and corporate balance sheets devastated when their exchange rates fell sharply during 1997 - 98, the fall in the new zealand dollar has had only minimal effect on bank and corporate balance sheets here. yes, there are a few companies which wish they had not taken out so much forward cover on their export receipts when the exchange rate was higher. but these contracts represent “ profits foregone ”, not the kind of disasters which wiped out so many banks and corporates in indonesia and thailand when their exchange rates fell. and the reason for this is that, perhaps because new zealand has had a freely floating exchange rate for more than 15 years now, banks and corporates

the weakest growth since 2009. this weakness comes despite several supportive factors including : the unprecedented monetary stimulus ; the positive effect of low commodity prices on spending power ; and cheaper and more sophisticated information technology. for example : • the world has never seen cheaper financing. policy rates are close to zero in advanced economies that collectively generate 2 / 3rds of world output, and bis central bankers ’ speeches quantitative easing by major central banks in advanced economies has totaled around usd7 trillion in recent years. 1 • due mainly to the weakening in chinese demand ( but also to strong supply in many markets ), prices of a wide range of commodities have been falling since early - 2014. 2 while this slows growth in the developing world ( which is the main global source of commodities ) falling commodity prices are generally positive for growth in developed countries. • the decline in the cost of information technology over the past three decades possibly represents the largest continuous set of factor cost reductions the world has experienced. not only is the marginal cost of storing, processing and transmitting information essentially zero, the creative destruction of information technology has generated new products and consumer markets, and enabled further efficiencies to be squeezed out of global supply chains. despite these factors, and the ease with which capital can flow across borders, economic growth rates even in the advanced commodity importing countries remain below potential growth rates eight years after the onset of the global financial crisis ( gfc ). many reasons have been advanced for the disappointing global recovery. some observers emphasise the depth of the gfc and its impact in repricing every asset across the globe, the scale of the household and corporate deleveraging that was unleashed and its prolonged impact on economic risk taking. others link the weak recovery to the slowdown in global trade, which has been a major catalyst for global growth in recent decades, and to the impact of protectionism and the maturing of global supply chains. there are also debates about future economic prospects, including whether these might look increasingly like the recent past or even worse. some consider that the global economy may be in danger of entering a period of secular stagnation characterised by excess desired global savings relative to investment and weak global demand. 3 others question whether rates of innovation and technological progress are slowing and whether productivity gains from the ict revolution have been largely realised. 4 the inflation picture also, is complicated. in the vast majority of the 30 or so economies ( mainly advanced economies ) whose central banks pursue inflation targeting, headline and underlying inflation