Foreword
The Treasury's vision statement focuses on higher living standards for New Zealanders. While a range of factors underpin well-being, raising New Zealand's economic performance is a central driver of permanently higher standards of living. New Zealand faces two key economic challenges that need to be addressed if our economic performance is to lift. These are:
- accelerating productivity growth to raise average incomes per person and to close the income gap with other wealthier countries; and
- reducing imbalances in order to better position us to weather the inevitable economic or financial shocks that will impact our economy in the future.
This paper is one of a suite of four papers that examine key elements of New Zealand's economic performance and the macro- and micro-economic factors that are inhibiting productivity growth and contributing to economic imbalances.
These papers follow on from Treasury's earlier suite of papers examining New Zealand's productivity performance.[1]
The four papers in the series are:
- Why are Real Interest Rates in New Zealand so High? Evidence and Drivers — examining interest rates in New Zealand, the apparent premium relative to overseas rates, potential drivers of this interest rate differential and the impact this might be having on investment;
- New Zealand's Exchange Rate Cycles: Evidence and Drivers — with a key focus on examining the nature of New Zealand's exchange rate cycle over the medium term and possible drivers for this cycle;
- Economic Imbalances: New Zealand's Structural Challenge — examining the imbalances in New Zealand's economy and their implications for resilience; and
- New Zealand's Exchange Rate Cycles: Impacts and Policy — focusing on the impact that New Zealand's exchange rate cycle has on the tradable sector and wider economic performance and possible policy responses.
The papers are being published to articulate the Treasury's current thinking on these issues. Our hope is that these papers will spark further debate on these important topics and stimulate further research that further advances our collective understanding of New Zealand's economic performance and possible policy change that may lift it.
