Interest rates will stay lower longer, a major player in New Zealand’s banking industry has told a Queenstown audience.
Westpac New Zealand treasurer Jim Reardon told a Queenstown business breakfast on Tuesday the country is in for a sustained period of low rates.
“Interest rates lower for longer I think is the call we will see.”
Credit rating agency Standard & Poor downgraded the country’s rating from AA+ to AA last week but an upbeat Reardon, reflecting on global financial woes, says the Kiwi economy is in quite good nick.
“The Government debt situation is very much under control. If you compare it to some of the European numbers, NZ is still in very good shape.”
Reardon puts that relative health down to the country shifting more exports in recent years towards Australia and Asia – all growth economies.
“More importantly, what we export – dairy, meat, fruit and wine – are staples. We have the capacity to enjoy relatively good times in terms of the amount of product we’re able to export.”
China’s increasing urbanisation is good for New Zealand exporters, he says.
“Broader Asia is still our way out of this.”
Reardon also touched on the US economy which he feels is not is ticking along not too bad.
“One of the main messages you should take away from today is as much as the US economy is struggling – and there’s a lot of debt issues – their economy is going not as bad as you think.
“Only New York is experiencing negative growth. The top 10 states are growing at 3.25 per cent a year so they’re actually experiencing relatively good growth,” he says.
“New York’s where the banks are and they are paying people less and so people have less to spend.”
Reardon predicted an ailing Greece would default at some point.
“The big question about the global economic impact is how much contagion there’ll be. That will be ultimately what the European Union will be focusing on,” Reardon says.