The recent performance of the Gross Domestic Product (GDP) in New Zealand has been scattered and provides no real indication of this quarter’s number. The last quarter’s (Q1) result shows slight weakness in the productivity of New Zealand, this result came in under expectations of 1% at a figure of 0.9%. The weaker GDP reading was related to the vast growing strength of the Kiwi dollar in the fourth quarter of last year.
This month, economists are expecting a quarterly growth rate of 1.2% from the New Zealand economy. Variables that contribute to this expectation would be drawn from the booming Dairy industry and current central bank stance on economic growth. Recently the Reserve Bank of New Zealand (RBNZ) has increase the cash rate to a 3.25%. This was an act to support a healthy economic growth rate by dampening the threat of an increasing inflation rate.
The last week has shown that the NZD has still some fight left in the currency. After the increase of the NZ cash rate last Thursday, the NZD found itself just over 1% stronger. The Governor of the RBNZ, Bryon Wheeler, during an announcement late last week, stated that they are targeting a 4% interest rate within 4 months.
If the Australian economy continues the path of low interest rates and the New Zealand economy continues the path of higher interest. Holding everything constant we may see parity of the two currencies by the end of 2014.