NZ Herald business editor at large

Liam Dann: Let the good times roll, for a while at least

Let's leave the Reserve Bank to worry about all the financial stuff while we enjoy the party. Photo / Natalie Slade
Let's leave the Reserve Bank to worry about all the financial stuff while we enjoy the party. Photo / Natalie Slade

This weekend Reserve Bank Governor Alan Bollard will join the world's central bankers at Jackson Hole, Wyoming, for their annual retreat.

The high-powered gathering hosted by US Federal Reserve chairman Ben Bernanke offers a chance for them to swap horror stories and do some serious thinking about how to tackle this unprecedented global financial crisis.

In 2008 and 2009 Bollard returned from the gathering in a sombre mood after being briefed on the gravity of affairs in US and Europe.

This year it is likely to be a similar story given the fears of US recession and European debt default that still stalk the financial markets.

But hey, let's leave it to him this year. Let's take it as read that he'll listen long and hard and apply his mind how best to set monetary policy in New Zealand for the remainder of the year - that's what we pay him for.

Back in New Zealand the weather is warming and we are about to host a grand old party.

Auckland is looking good. The streets are tidy and people are out and about, checking out new attractions like the waterfront Wynyard Quarter.

If you screw your eyes up really tight you could just about convince yourself that the worst might be over.

A few short weeks after the triple whammy of icy winter chill, London looting and the stock market crash, it feels the end may not be so nigh.

Yes, it might all be a thin veneer - Christchurch is still in bad shape, and the underlying economic problems remain. There will probably be another European crisis and another market meltdown.

But it is starting to look like the Rugby World Cup may just turn out to be the event we all hoped it would be. And its timing may just be right to give New Zealand the dose of positivity it needs to bed down an economic recovery.

There have been snippets of good economic news floating around this week. The country recorded its first trade surplus in 20 years. Usually as dairy exports tail off for the season a deficit for the month is normal. But high commodity prices and a bumper dairy season saw a net gain of $129 million for the month.

Export-led recovery? We might be soaking in it.

It is not a quick fix but it is the kind of steady rebalancing of the economy that the Government is counting on to make its policy settings work.

On the flip side of that balancing act there was a cautiously positive survey released by the Reserve Bank this week suggesting inflation fears are easing.

With any recovery there is a risk that a sharp rebound will cause inflation to spike and that can force the Reserve Bank's hand in lifting the cash rate, which in turn slows the recovery.

This week's quarterly survey found inflation expectations had fallen back to 2.86 per cent, having risen to 3 per cent in the previous survey.

Meanwhile, the survey found optimism about economic recovery remains high among respondents. That's the combination we're looking for - sweeter than a Sonny Bill Williams hand-off to Israel Dagg.

Then on Thursday we finally had some upbeat retail trade figures. Sales grew almost 1 per cent in the June quarter.

Not much really but, given the retail sector has been struggling more than most, the data was a much-needed indicator that consumer confidence could be returning.

With all this data economists have been quick to apply the caveat that a serious global slowdown would stop the recovery in its tracks.

The big challenges facing the world aren't going anywhere fast. But perhaps they can look after themselves for the next two months while New Zealand dares to enjoy itself.

Let's show our visitors a good time and make the most of this valuable global branding exercise.

In strict accounting terms the cup was never going to turn a profit for the country. But it has the potential to deliver bigger, less tangible rewards if we do things right.

There is a fine line between self-delusion and self-confidence.

But when the timing is right, a little bit of the former may provide the spark to light a powder keg of the latter.

The Rugby World Cup is our opportunity to kid ourselves everything is all right for a few short weeks. Let's not waste it.

- NZ Herald

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NZ Herald business editor at large

Liam Dann is business editor at large at the New Zealand Herald. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy. He hosts The Economy Hub video show every Thursday.

Read more by Liam Dann

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