IMF gives another tick to New Zealand economy

The latest International Monetary Fund report on the New Zealand economy says economic expansion "is becoming increasingly embedded and broad based." The IMF is forecasting economic growth of 3.5% and predicts that it will not fall below 2.5% over the next few years. 

The economy will be driven by strong construction activity, higher prices for exports and increases in net migration. And a sharp slowdown in China and Auckland's overheated property market remain the two threats to economic growth in New Zealand.

You can read the full report here.

A cautious rise in New Zealanders economic confidence

Consumer confidence in New Zealand is at its highest level in two years according to the latest global Neilson survey carried out between 14 August and 6 September. Consumer confidence indexed at 93 in the second quarter of 2013, increasing three points. (Confidence levels above or below a baseline of 100 indicate degrees of optimism and pessimism.)

"Confidence levels of New Zealanders are the highest we've seen in two years and nearly half of Kiwis (47%) now believe we are out of recession, an improvement of 12 percentage points in the last year," says Neilson NZ managing director Rob Clark.

Consumer confidence improvements were reported in Asia-Pacific (+2 to 105), North America (+2 to 96) and Middle East/Africa (+6 to 91). Europe's index held steady at 71.

New Zealand economy on the rebound

After five years in the doldrums the New Zealand economy may be on the rebound. Economists are predicting GDP growth of 3% or more and even the IMF expects growth to pick up to 2.9% - ahead of our Western trading partners (including Australia) and not far behind Asian nations like South Korea and Singapore. The rebuild of the quake-devastated city of Christchurch (home to the current SCAPE Biennale) is one of the major economic drivers, along with a booming dairy industry and better than expected growth in the Chinese economy (New Zealand's second largest trading partner, after Australia).

Government by crisis

At the 11th hour, Senate leaders have reached a bipartisan deal to raise the debt ceiling, setting in train a race against the clock to pass the deal through the Republican-controlled House of Representatives and Democratic-controlled Senate in time for Barrack Obama to sign it before midnight on Thursday.

But it's a short-term fix that reopens government and raises the debt ceiling until early next year when the next round of political brinksmanship is likely to begin all over again, which would further undermine confidence in the US economic recovery and long-term viability of the dollar as the world's reserve currency - a prospect that has prompted business magnate Warren Buffett to call on both sides not to use the debt limit as a "political weapon of mass destruction."

You can follow the passage of the deal (and commentary) live here.
Image: The US Capitol

Default advocates: the tail wagging the G.O.P. dog

In an article posted on the New York Times blog, Bruce Bartlett says the Obama administration and those on Wall Street have long thought the prospect of a default was so horrifying that it would necessarily lead to resolution of the current impasse. "What I don't think they understand is that there has been a movement underway for some years among right-wing economists and activists not merely to default on the debt, but even to repudiate it," he says. Read more...
Image: US National Debt Clock (detail)

Surge in the market for US credit default swaps

Growing investor fears that Washington could miss a payment on its debt has led to a surge in the market for derivatives that insure against a US default. The Financial Times says the average daily trading of credit default swaps (CDS) which give investors protection on US government debt, has jumped to €150m in the past week from about €1.5m in recent months.

The spike in trading activity is unusual for US sovereign CDS, which is traditionally a very thinly traded market, as traders often say buying protection on the possibility of the US government restructuring or defaulting on its debt, is akin to buying insurance for the end of the world.

Economist Paul Krugman on Rebels without a Clue

Washington and international officials have raised the alarm on a potentially disastrous clash over the US debt limit as Democrats and Republicans remain no closer to reolving the budget feud that has shut down much of government. If Congress fails to raise the borrowing cap by mid October, the US could default on its obligations for the first time and send shock waves across the world.

International Monetary Fund chief Christine Lagarde says: "The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the US economy, but the entire global economy." And the US Treasury has also warned that failure to raise the debt ceiling could spark a new recession even worse than the one Americans are still recovering from.

So why are Republicans set on taking the US to the brink of financial catastrophe again? Paul Krugman says the party's delusional wing either don't understand what is at stake, or don't care. Read more...