BRIEF-RBNZ Says Demand For Goods Exports Has Fared Much Better Than During Previous Global Downturns

Reserve Bank of New Zealand: * EARLY DISCOVERY OF VACCINES AGAINST COVID-19 HAS SUPPORTED A STRONGER-THAN-EXPECTED RECOVERY IN THE GLOBAL ECONOMY

* AUGUST MONETARY POLICY STATEMENT NOTED WE HAD MORE CONFIDENCE THAT EMPLOYMENT WAS AT ITS MAXIMUM SUSTAINABLE LEVEL * DEMAND FOR OUR GOODS EXPORTS HAS FARED MUCH BETTER THAN DURING PREVIOUS GLOBAL DOWNTURNS

* ALSO BENEFITED FROM A ROBUST RECOVERY IN THE CHINESE ECONOMY, OUR LARGEST TRADING PARTNER * MONETARY AND GOVERNMENT SPENDING POLICIES HAVE SUPPORTED A STRONG RECOVERY IN SPENDING.

* GOVERNMENT’S WAGE SUBSIDY SCHEME IS A POLICY THAT HAS BEEN PARTICULARLY EFFECTIVE IN SUPPORTING THE WIDER RECOVERY * BUSINESS INVESTMENT HAS ALSO PICKED UP AS THE ECONOMY HAS RECOVERED

* LOOKING AHEAD, WE SEE THE LEVEL OF HOUSE PRICES AS UNSUSTAINABLE RELATIVE TO THEIR FUNDAMENTAL DRIVERS * IN AUGUST, COMMITTEE AGREED THEIR “LEAST REGRETS POLICY STANCE IS TO FURTHER REDUCE MONETARY STIMULUS TO ANCHOR INFLATION EXPECTATIONS"

* THE DISRUPTION TO THE SUPPLY SIDE OF THE ECONOMY HAS ALSO BEEN MORE PROLONGED THAN ANTICIPATED * THERE HAVE BEEN SIGNIFICANT DISRUPTIONS TO SUPPLY CHAINS, PARTICULARLY RELATED TO THE SHIPPING INDUSTRY

* GIVEN EMERGENCE OF TRANSMISSIBLE VARIANTS OF COVID-19, DISRUPTIONS TO MOVEMENT OF GOODS & PEOPLE GLOBALLY LOOKS LIKELY TO CONTINUE OVER MEDIUM TERM * INITIAL HEALTH MEASURES WERE ABLE TO CONTAIN VIRUS, WITH MOST HOUSEHOLDS & BUSINESSES ABLE TO RETURN TO NORMAL ACTIVITIES SOONER THAN FEARED

* NATIONAL LEVEL HOUSEHOLD INCOMES WERE LARGELY MAINTAINED THROUGH COVID-19 LOCKDOWN PERIODS * THE RECOVERY PHASE HAS ALSO SEEN HOUSE PRICES GROW RAPIDLY FROM ALREADY ELEVATED LEVELS

* THERE HAS BEEN STRONGER THAN EXPECTED DOMESTIC ECONOMY AND ASSOCIATED IMPROVEMENT IN JOB SECURITY * COVID-19 HAS ALSO MADE IT MORE DIFFICULT FOR FIRMS TO SOURCE LABOUR

* PRESSURES ON CAPACITY WOULD FEED THROUGH INTO MORE PERSISTENT INFLATION PRESSURES OVER THE MEDIUM-TERM * IN A GOOD POSITION TO NAVIGATE THE PERIOD AHEAD, WITH THE LABOUR MARKET OPERATING AT MAXIMUM SUSTAINABLE EMPLOYMENT

* NOTED THAT MONETARY POLICY RESPONSE WOULD BE REQUIRED FOR FUTURE HEALTH LOCKDOWNS IF THERE WAS MORE ENDURING IMPACT ON INFLATION, EMPLOYMENT Further company coverage: (Reuters.briefs@thomsonreuters.com)

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