By BRIAN FALLOW
Had it not been for the expectation that export prices would fall, the case for cutting the official cash rate last week would have been non-existent, Reserve Bank Governor Don Brash said yesterday.
Rising export commodity prices have been one of the main propellants of economic growth over the
past three years, helping New Zealand enter the global slowdown with a fair head of steam up.
All this year the Reserve Bank has been forecasting that slowing growth in New Zealand's trading partners would trigger a steep fall in export prices.
But it has been confounded in its forecast, at least until last month when the ANZ Bank's world commodity price index dropped 2.4 per cent.
Last week's monetary policy statement forecast a 10 per cent drop in export receipts over the year to March 2003, driven by a double-digit drop in export prices.
But the Reserve Bank still expects export volumes to grow, albeit at a slower pace than last year.
In a speech in Whangarei at the start of a roadshow aimed at small and medium-sized enterprises, Dr Brash said it was important not to talk ourselves into a gloomy frame of mind just because the slowing in the world economy could be substantial.
"The economy is well placed to weather the international slowdown, with moderate growth, low unemployment, an exchange rate which is providing useful support for export and import-competing industries and ample scope for further easings of monetary policy [if] necessary."
