Both Countries Grew Strongly over the
Decade
Australia stronger, but not by much
GDP growth
% yoy
% yoy
6
6
Australia
4
4
2
2
New Zealand
0
0
-2
-2
96
98
00
02
04
06
But Australia Experienced Much Stronger
Terms of Trade
which fell in the crisis, but by less
Terms of trade
Index
1990 Q1 = 1000
Index
1990 Q1 = 1000
1800
1800
1600
1600
Australia
1400
1400
1200
1200
1000
New Zealand
1000
800
800
600
600
00
02
04
06
08
Both Countries’ Financial Systems
Weathered the Crisis Well
with similar institutions and policies
Basis Points
300
Credit default swap spreads
Basis Points
300
250
250
New Zealand
5 year CDS spread
200
200
150
150
100
100
Australian
5 year CDS spread
50
0
Jul-08
50
0
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Strong Chinese Growth Assists Australia
more than most countries
Exports to China
(% of total)
Source: Grattan Institute
Exports share for
China’s ‘domestic’ use
Australia Is Investing Heavily In Minerals
encouraged by new finds, strong prices & bottlenecks
Capital investment by the Australian mining industry
Source: Grattan Institute
Australian Future Growth Potential
Looks Very Strong
due to investment, population growth, terms of trade,
& stimulative policies
Estimates of potential output growth
%
4
Australia
OECD average
3
2
1
0
2006-2008
Source: OECD
2009-2010
2011-2017
NZ also Stimulated the Economy
but growth went negative & pick-up slower
GDP growth
% yoy
6
% yoy
6
RBNZ forecasts
Australia
4
4
2
2
New Zealand
0
0
-2
-2
-4
-4
06
07
08
09
10
But Financial Markets View
the Countries Similarly
despite different growth & inflation forecasts
Official cash rates
%
10
Market
expectations
%
10
8
8
6
6
Australia
4
4
2
0
Jan-08
New Zealand
2
0
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
And this is Particularly so in FX Markets
where the cross-rate is very stable
Exchange rates
Index
Index
1.2
1.2
1.0
1.0
AUD/USD
0.8
0.8
0.6
0.6
0.4
0.4
NZD/USD
0.2
0.2
0.0
0.0
90
92
94
96
98
00
02
04
06
08
Despite NZ Economy being more Vulnerable
manufacturers & services have a bigger share of
exports
Non-commodity exports
% of GDP
20
% of GDP
20
16
16
New Zealand
12
12
8
8
Australia
4
4
0
0
91
93
95
97
99
01
03
05
07
09