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New Zealand Debt Management
Investor Update
October 2022

The Investor Update is a monthly publication that provides a quick snapshot of the New Zealand economy, the fiscal outlook, monetary policy and the New Zealand Government Debt Market. 

Economic Update

The New Zealand economy rebounded from the weak March quarter, increasing 1.7% in the June quarter. Compared to the same quarter a year ago, real GDP was up 0.4% – a solid result given that the June 2021 quarter predates the Omicron outbreak. Annual average growth slowed sharply to 1.0% and is no longer being influenced by the strong rebound from the first lockdown in 2020 (Figure 1). Real GDP is now 4.8% above pre-COVID levels.
For further up to date economic indicators read the Treasury’s latest Fortnightly Economic Update.
Figure 1: Real Production Growth
Source: Stats NZ

Monetary Policy

The Reserve Bank (RBNZ) increased the Official Cash Rate (OCR) by 50bps to 3.50% at the October Monetary Policy Review (MPR) (Figure 2).

The October MPR stated the level of domestic spending has remained resilient to date, in the face of slowing global growth and higher domestic interest rates. Employment levels are high, and household balance sheets remain resilient despite the fall in house prices.
The MPR also noted that monetary conditions need to continue to tighten until they are confident there is sufficient restraint on spending to bring inflation back within its 1-3 percent per annum target range.

Figure 2: Official Cash Rate
Source: RBNZ

Fiscal Update

Overall, the Financial Statements of the Government of New Zealand for the year ended 30 June 2022 were better than forecast at the Budget Economic and Fiscal Update (BEFU) in May 2022, with the exception of net debt.
  • The operating balance excluding gains and losses deficit was $9.7 billion (-2.7% of GDP), which is an improvement on the $19.0 billion deficit forecast in BEFU 2022.
  • Net worth increased by $17.1 billion to $174.3 billion largely as a result of significant upward property, plant and equipment revaluations, offset by the operating balance deficit.
  • Net debt at $61.9 billion (17.2% of GDP), was close to the $61.2 billion (16.9% of GDP) forecast in BEFU 2022.

New Zealand Government Bond Market Developments

New Zealand Debt Management (NZDM) has published the Framework setting out how the Government plans to finance or refinance climate and environmental expenditures through the issuance of New Zealand Sovereign Green Bonds. The Framework sets out the Government’s climate change mitigation and adaptation, and environmental priorities. It also outlines the basis for identifying, selecting, managing, and reporting on expenditures financed with Green Bonds.

The recently published October tender schedule indicated that Inflation-Indexed Bond (IIB) tenders are scheduled for 13 October 2022 and 27 October 2022.  As previously announced, IIB demand from market participants will be assessed prior to a scheduled IIB tender. The information received will contribute to the decision to hold that tender, the volume, and the IIB maturity date(s) to be offered. If your organisation would like to provide feedback, please mail or NZDM would be happy to facilitate a call if preferred.

Upcoming Events

  • Green Bond Syndication - Prior to 31 December 2022
  • New Zealand Nominal Bonds added to the FTSE-Russell World Government Bond Index (WGBI) - 1 November 2022
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