Reserve Bank of New Zealand Bulletin articles

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December 2005 (Vol. 68, no 4)

Download the complete issue of the December 2005 Bulletin (PDF 505KB)

Articles

Editor's Note (PDF 32KB)

Oil prices and the New Zealand economy (PDF 136KB)

By Felix Delbruck
This article looks at New Zealand's oil consumption at a disaggregated level and discusses the consequences of movements in international oil prices for inflation, taking into account New Zealand's industry structure as well as the tax treatment of different fuel types. Relative to the size of its economy, New Zealand uses a comparatively large amount of oil as transport fuel. The evidence suggests that the indirect (cost-push) effects of higher oil prices on consumer prices could be quite large, substantially driven by higher transport services costs. How large they turn out to be, and whether they matter for medium-term inflation and monetary policy, will depend on factors such as the state of the economic cycle, the degree of competition in particular industries, and the extent to which inflation expectations are anchored.

A fresh look at the merits of a currency union (PDF 120KB)

By Chris Hunt
This article provides an update on the ongoing debate as to whether New Zealand should enter into a currency union with Australia. While the decision to adopt a common currency would ultimately be a political one, assessing the specific economic costs and benefits is important for informed debate. Theoretical developments in the currency union literature and the experience of actual currency unions are both relevant considerations. Experience with the European Monetary Union has focussed attention on the `endogeneities' of optimal currency areas, where a common currency can be the catalyst for further economic integration between member states. However, the jury is still out on this front. Since our last review in 2001, there has also been some further local research looking at how a common currency might influence the New Zealand economy, but the implications of this research remain inconclusive. The case for a common currency for New Zealand and Australia, at least in economic terms, continues to be open for debate.

Monetary Policy and economic performance: the experience of New Zealand (PDF 115KB)

By Alan Bollard, Governor, and Chris Hunt
This article is an abridged version of a paper prepared for a conference commemorating the 80th anniversary of the Bank of Mexico held on 14-15 November. The theme of the conference was `Stability and Economic Growth: The Role of the Central Bank'. The article reviews New Zealand's economic performance, which has improved significantly since the early 1990s. The article suggests that New Zealand's monetary policy framework is likely to have played a role in lifting economic performance, along with many other factors, most notably the widespread economic reforms. The article discusses the ways in which inflation may affect economic growth and briefly summarises some empirical literature. It also ponders the benefits of business cycle stabilisation - which may be a by product of inflation targeting - a subject of some controversy in the economic literature. A full version of the paper can be accessed at www.rbnz.nz

Speeches

Imbalances in the New Zealand Economy (PDF 54KB)

An address by Dr Alan Bollard, Governor, Reserve Bank of New Zealand, to the New Zealand Credit and Finance Institute on 14 October 2005. Alternatively, link to the html version of this speech by Alan Bollard.

The views expressed are those of individual authors and do not necessarily reflect official positions of the Reserve Bank of New Zealand. Articles published in this Bulletin may not be wholly or substantially reproduced without the permission of the Reserve Bank of New Zealand. Data, brief extracts from articles, and other material appearing in the Bulletin, may be used without restriction provided due acknowledgement is made of the source.