It is interesting to note that what appeared to be a well-paved road to recovery at the end of 2009 in Australia has become somewhat less certain as 2010 has unfolded. Although last month the Federal Reserve left interest rates unchanged, 5 previous rate rises have had their impact – especially in the benchmark retail sector. Meanwhile, NZ interest rates have now started to move upwards, moving to 2.75% in early June.

The issues in Greece that have also led to exchange rate volatility have impacted both the NZ and Australian dollars, while, in Australia, the recent political battles over tax reform have added to jitters in the markets.

All things being equal, however, both the Australian and New Zealand economies remain sound with strong 3% plus growth forecasts for the year ahead – making them very sound in comparison to other developed economies. While consumers may be holding off from spending the unemployment rate has fallen in both countries, to 5.2% in Australia (May figures) and 6% in New Zealand (March Quarter, released in May).

As professional service providers we remain confident of the economic situations in both countries in line with the economic data presented – but are mindful that external factors yet may have some surprises in store for us all.

Jim Smith

MSI Ragg Weir  

June 2010