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NZ Budget 2011....mild NZD positive

Written by Sam Coxhead on May 19th, 2011.      0 comments

4:00 PM (NZT) This afternoon the New Zealnd Finance Minister Bill English presented the NZ Government Budget for 2011. Many of the policy changes had been released ahead of time, but the market has taken the disiciplined budget as being mildly positive. As flagged earlier, the Govt accounts are expected to make it back into surplus in the 2013/14 year, a year earlier than last years forecasts. This is no small result considering the expensive clean up and rebuilding exercise underway after the Christchurch earthquake.

Headline have been dominated by the prospect of partial privatisation of Govt energy assets, and a further dilution of the Govt shareholding in national carrier Air NZ. Govt contributions to the Kiwisaver scheme have also been cut back , with individuals and employers being forced to pick up the slack.

The Govt is also picking economic growth to hit 4% in 2012 and expect job creation of 170,000 by 2015.

The earlier than expected forecast for a return to surplus should ensure the credit rating agencies are placated for the time being. Higher borrowing costs via a lower credit rating was obviously something the Govt is very aware of.

It will be interesting to see how the NZD/USD performs over the next 24hours as their was evidence of short NZD position covering ahead of this budget announcement. The NZD is stronger against all its trading partners since the release.

  Current level Pre- NZ Bud  % Chge since NZ Budget
NZD/USD 0.7923 0.7897 0.33%
AUD/USD 1.066 1.0651 0.08%
NZD/AUD 0.7431 0.7411 0.27%
AUD/NZD 1.3457 1.3493 -0.27%
NZD/GBP 0.4897 0.4882 0.31%
NZD/EUR 0.5545 0.5531 0.25%
NZD/JPY 64.64 64.43 0.32%
NZD/CAD 0.7673 0.7648 0.33%