New Zealand’s economy is recovering from the impact of the global crisis but the progress of the upturn is uncertain, central bank governor Alan Bollard said on Monday.
Bollard joined other central bank chiefs from around the world in Jackson Hole, Wyoming in the US this month and he said the belief among them was the world was poised for an upturn.
“Now we can see the turning point, we can see how bad it gets, we can see the bottom of the abyss and we can see out the other side,” Bollard told Radio New Zealand.
“There was generally a broad feeling of relief, but there’s a long way to go yet,” he said.
New Zealand had already been in recession from early last year and the impact of the global financial crisis killed off hopes of an early recovery.
The country’s economy has shrunk for five consecutive quarters but Bollard said signs of an upturn were clear.
“The New Zealand economy is recovering, and for us it’s not so much just the size of the recovery -- its the quality we will be concerned about,” he said.
Growth during several years up to 2007 was based around a housing boom and debt-funded private consumption and Bollard is keen to see a more sustainable recovery based on consumers living within their means.
“We do think we are going into a different world and its going to be a world that’s got less funds available than in the past,” he said.
This was partly due to east Asians spending more on domestic consumption rather than propping up consumption in western countries through their savings.
Bollard added there were still pitfalls for the world and New Zealand economies.
“I don’t think anyone is saying there is a robust recovery yet,” he said.
“We have lost a couple of year’s growth and it looks like a fragile recovery.
“There’s going to be big scars out of this. There’s still a possibility that stuff could go wrong in the financial sector."