Weekly Global Economic Round-up - 3 July 2023

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Weekly Global Report:

Prepared by the Economic Division at the Ministry of Foreign Affairs and Trade.

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Highlights

  • Prime Minister Chris Hipkins met with China’s leaders last week in Beijing, in the first leader-level visit to New Zealand’s largest trade partner since 2019. The Prime Minister released a joint statement(external link) and signed cooperative arrangements on trade, agriculture, forestry, education, and science and innovation.
  • On 27 June leaders of European Union member states formally approved(external link) the signature of the EU-NZ free trade agreement.
  • New Zealand-China air connectivity will increase by 7,000 seats per month from November. China Southern has announced(external link) that it will reinstate the pre-covid Guangzhou-Christchurch route and add three additional services per week between Guangzhou and Auckland.
  • The Bank of International Settlements described(external link) the global economy as being at a “critical and perilous juncture” as policymakers seek to manage financial vulnerabilities and bring inflation under control. The Bank also warned that “inflation could well turn out to be more stubborn than currently anticipated”.

Regional updates

Domestic

  • The number of filled jobs rose(external link) 3.7% year-on-year in May 2023, pointing to solid growth and to migration not fully meeting labour market shortages.
  • The Government announced(external link) $128m in additional funding for tertiary education.
  • Hamish Marr(external link) took up the role of New Zealand’s Special Agricultural Trade Envoy on 1 July.

Global

  • The heads of US, UK and European central banks told a conference in Portugal that further rate hikes may be needed to bring inflation into target bands in the face of tight labour markets.

Americas

  • US Federal Reserve Chair Jerome Powell expressed optimism about the US economy, describing it as “quite resilient” and “still growing, albeit at a modest pace”. He acknowledged that while a recession is still possible, it is “not the most likely case” and that wage pressures are “definitely coming down”. Powell’s comments followed a suite of stronger than expected recent numbers on US durable goods orders, new home sales, and consumer confidence.

Asia

  • China’s premier Li Qiang told the World Economic Forum’s annual China conference that his country was on track to meet its goal of 5% annual growth for 2023, with a “clear momentum of rebound and improvement” following 4.5% growth in the first quarter of the calendar year.
  • Japan and the European Union agreed(external link) a set of Digital Trade Principles and committed to strengthen their cooperation on supply chain resilience for semiconductors and other critical materials.
  • Sri Lanka’s government has agreed a proposal to restructure US$42 billion of domestic debt under the terms of its US$3 billion IMF bailout. The proposal will be submitted to parliament for approval. Sri Lanka remains in negotiations to restructure US$42 billion of foreign debt.

Australia

  • Treasurer Jim Chalmers announced that Australia’s budget surplus for 2022/23 – the first for fifteen years - will be higher than forecast in May. Chalmers predicted 1.5% growth in GDP for 2023/24, down
    from 3.25% this year.
  • Australian economic data released this week has been solid. The monthly consumer price index eased to 5.6% year-on year in May, down from 6.8% in April. Retail sales increased 0.7% month on month in May, beating expectations. Job vacancies fell 2% to 431,600 in the three months to May, the fourth straight quarter of decline, but remain 89% above pre-pandemic levels.

Europe

  • The EU released its first-ever Economic Security Strategy(external link), which “focuses on minimising risks arising from certain economic flows in the context of increased geopolitical tensions and accelerated technological shifts, while preserving maximum levels of economic openness and dynamism.”
  • The EU has reportedly rejected a US proposal of measures to end Trump-era tariffs on European steel and aluminium. European trade commissioner Valdis Dombrovskis will travel to Washington for talks next week. In the absence of an agreement both US tariffs and EU retaliatory measures will snap back into force in October.
  • The EU announced(external link) its eleventh package of sanctions on Russia, including tightening criteria for designating those whose activities circumvent sanctions.

Pacific

  • Fiji has validated the blueprint for a new single-window trade system to simplify Fiji Government trade procedures by allowing electronic submission of trade related information to government agencies. The move towards a single window is in line with Fiji’s commitments under the WTO Trade Facilitation Agreement.
  • Majestic Seafood Corporation Ltd has closed a tuna cannery in Lae, Papua New Guinea (PNG) with more than 5,500 redundancies following price increases due in part to supply chain issues between vessels and processing plants. PNG has recently introduced a Vessel Day Scheme (VDS) and rebates to incentivise in-country processing, and is developing policies to increase the socio-economic benefits from
    the tuna industry and to support supply chain resilience.

Market reports released this week

External links

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