Tuesday, 11 September 2018 13:55

US/China trade wars pose risk

Written by  Peter Burke
Sharon Zollner, ANZ chief economist. Sharon Zollner, ANZ chief economist.

The US trade war with China poses a risk for New Zealand, says ANZ’s chief economist, Sharon Zollner.

Speaking at a business forum last week on the Kapiti Coast, she said the risk for NZ is how much  the trade war impacts on the Chinese economy. A possible problem for NZ would be its effects on people’s incomes and their ability to pay for farm products.

And this is occurring at the same time as the Chinese economy is slowing, Zollner says. 

“Their authorities have lots of levers they can pull that other countries don’t have, but we are now seeing them loosening up on monetary policy in allowing more lending, and on fiscal policy. 

“And they have made a tax cut, so that will support their economy in the near term.   

“That is the glass-half-full view; the glass-half-empty view is ‘what are they seeing in their economy that they are trying to offset? and what does that mean for NZ?”

Zollner says in trade terms NZ is more tied to the hip of China than ever before. She says while other markets in Asia are opening up, China remains the most important one for NZ.

She points to dairying’s many challenges – M.bovis, the weather and fluctuations in dairy prices, and she notes the fall in last week’s GDT was the ninth in the last twelve auctions.

“So I guess you can call that a trend,” she says.

A huge challenge facing the dairy industry in the long term will be meeting the Productivity Commission’s  proposed low emission regime, Zollner says. With the whole agricultural model set to change, including a reduction in cows, that will make for interesting times.

“The dream is sustainable and profitable but there is a lot of road between here and there,” she says.

 

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