Market Outlook Fifth level September 2019 Click to edit Master - - PowerPoint PPT Presentation
Click to edit Master title style Click to edit Master text styles Second level New Zealand Government Debt Third level Fourth level Market Outlook Fifth level September 2019 Click to edit Master title style Overview
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Source: StatsNZ, The Treasury, BEFU 2019
June years 2018 2019 2020 2021 2022 2023 Actual Forecast Forecast Forecast Forecast Forecast Economic Real production GDP (annual average % change) 3.2 2.4 3.0 2.8 2.4 2.4 Real GDP per capita (annual average % change) 1.1 0.7 1.5 1.5 1.3 1.2 Unemployment rate (June quarter) 4.4 4.1 4.0 4.1 4.2 4.3 CPI inflation (annual % change, June quarter) 1.5 1.8 2.0 2.1 2.0 2.0 Current account balance (% of GDP)
Fiscal (% of GDP) Core Crown tax revenue 27.8 28.2 28.2 28.5 28.6 28.8 Core Crown expenses 27.9 29.1 29.4 29.6 29.0 28.8 Total Crown operating balance before gains and losses 1.9 1.2 0.4 0.6 1.3 1.7 Core Crown residual cash 0.5
0.3 Net core Crown debt 19.9 20.1 20.4 20.7 19.9 18.7 Net worth attributable to the Crown 44.9 43.4 42.5 42.1 42.8 43.9
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0.0 2.5 5.0 Jun-05 Jun-08 Jun-11 Jun-14 Jun-17 Jun-20 Jun-23 Quarterly Quarterly % change Annual average % change
%
Forecast
Source: Statistics NZ, The Treasury, BEFU 2019
Real GDP growth
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Source: Statistics NZ, QV, The Treasury, BEFU 2019 *Prior to June 2015, net migration data is the old series, which was based on intentions
5 10 15 20 25 30 35 40
20 40 60 80 Mar-00 Mar-03 Mar-06 Mar-09 Mar-12 Mar-15 Mar-18 Mar-21 Quarterly Net migration* House prices (RHS) Annual % change Forecast Annual sum (000s)
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1 2 3 4 2 4 6 8 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19 Jun-21 Jun-23 Unemployment rate Output gap (RHS) % of labour force % of potential GDP Quarterly
Forecast
Source: Statistics NZ, The Treasury, BEFU 2019
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1 2 3 4 5 6 Jun-05 Jun-08 Jun-11 Jun-14 Jun-17 Jun-20 Jun-23 Quarterly Annual % change Forecast
Source: Statistics NZ, The Treasury, BEFU 2019
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Source: Statistics NZ, The Treasury, BEFU 2019
800 900 1000 1100 1200 1300 Jun-05 Jun-08 Jun-11 Jun-14 Jun-17 Jun-20 Jun-23 Quarterly Terms of trade Index (2009/10=1000) Forecast
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Source: Statistics NZ, QSBO
10 20 30 40 50
2 4 6 8 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 Net % APC Real GDP QSBO - Own Activity (RHS)
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Source: The Treasury, BEFU 2019
5 10 15 2009 2011 2013 2015 2017 2019 2021 2023 Year ending 30 June
Operating Balance (excluding gains and losses)
Forecast NZ $billions
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Source: The Treasury, BEFU 2019
5 10 15 2018 2019 2020 2021 2022 2023 NZ $billions Year ending 30 June Operating Capital Residual cash
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Source: The Treasury, BEFU 2019
4 8 12 16 20 24 28 32 10 20 30 40 50 60 70 80 2009 2011 2013 2015 2017 2019 2021 2023 NZ $billions Year ending 30 June Net core Crown debt % of nominal GDP (RHS) Forecast % of GDP
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Moody’s Aaa/Aaa (stable)
“New Zealand's credit profile reflects its very strong institutions and policy effectiveness and a strong fiscal position compared to
vulnerabilities related to high reliance on external financing and elevated household debt.” Feb 2019
Standard & Poor’s AA+/AA (positive)
“The ratings on New Zealand reflect the country's fiscal and monetary policy flexibility, economic wealth and resilience, and stable public policy settings. These strengths provide the country with flexibility to offset potential risks related to its large external imbalances, high household and agriculture sector debt, dependence on commodity income, and financial system stability.” Jan 2019
Fitch AA+/AA (stable)
“New Zealand's ratings are underpinned by very high governance standards, a demonstrated commitment to prudent fiscal management, and a credible policymaking framework that helps manage risks and respond to pressures. The country's high net external debt and elevated household debt are the key weaknesses for the credit profile.” Jan 2019
Source: Moody’s Investor Service, Standard & Poor’s, Fitch Ratings
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Source: World Bank Worldwide Governance Indicators 2017 70 80 90 100
Control of Corruption Government Effectiveness Political Stability and Absence of Violence/Terrorism Regulatory Quality Rule of Law Voice and Accountability
Average of sovereigns rated AA (fc) and higher by S&P New Zealand
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Source: Bloomberg
0.0 1.0 2.0 3.0 4.0 5.0 Aug 2012 Aug 2013 Aug 2014 Aug 2015 Aug 2016 Aug 2017 Aug 2018 Aug 2019 % 10-year yield: NZGB (rated AA (fc) by S&P) 10-year yield: Average of sovereigns rated AA (fc) and higher by S&P
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Source: Bloomberg
0.0 0.5 1.0 1.5 2.0 5 10 15 20 25 % T erm (years) NZGB - nominal bonds* NZGB - inflation-indexed bonds (real yield)*
* yields (mid rate) as at 27 August, 2019
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Source: The Treasury
10 20 30 40 50 60 70 80 90 2 4 6 8 10 12 14 16 18 20
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
NZ$b NZ$b Annual bond issuance - year ended June Total Market Bonds on Issue (RHS)
Forecast
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Source: The Treasury, BEFU 2019
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Source: The Treasury
As at 31 March, 2019
0.0 2.0 4.0 6.0 8.0 10.0 12.0 Apr 20 May 21 Apr 23 Apr 25 Sep 25 Apr 27 Apr 29 Sep 30 Apr 33 Sep 35 Apr 37 Sep 40 NZ$b
As at 30 June 2019
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Source: The Treasury
IIB Sep 2025 NB Apr 2020 NB Apr 2027 NB Apr 2033 NB Apr 2037 IIB Sep 2040 NB Apr 2029 NB May 2031 IIB Sep 2030 IIB Sep 2035 NB Apr 2025
5 10 15 20 25 2012 2013 2014 2015 2016 2017 2018 2019 Years to maturity Calendar years of syndication Nominal Bonds Inflation-Indexed Bonds Expected syndication
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Source: The Treasury
4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 Jul 12 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17 Jul 18 Jul 19 NZGB Portfolio - Average Weighted Years to Maturity Years
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Source: The Treasury
Inflation-indexed Bonds Inflation-indexed Bonds Treasury Bills Treasury Bills Nominal Bonds Nominal Bonds
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Source: Bloomberg, The Treasury
1 2 3 4 5 6 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018 Jun 2019 Jun 2020
NZ$b % IIB issuance (fiscal year) (RHS) Inflation breakeven for IIB2025
Forecast
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Source: Bloomberg
0.0 0.5 UK Germ JP US AU NZ %
10-year real yield As at 27 August 2019
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Source: Bloomberg, RBNZ
10 20 30 40 50 60 70 80 90
Jul 95 Jul 98 Jul 01 Jul 04 Jul 07 Jul 10 Jul 13 Jul 16 Jul 19 Non-resident holdings of NZGBs (%)
%
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Source: RBNZ
0.0 2.0 4.0 6.0 8.0 10.0 12.0
2020 NB 2021 NB 2023 NB 2025 NB 2025 IIB 2027 NB 2029 NB 2030 IIB 2033 NB 2035 IIB 2037 NB 2040 IIB
NZ$b
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wellbeing of people, the health of the environment and the strength of communities.
just transition to a low-emissions economy.
greenhouse gas emissions and climate resilience in New Zealand.
programme
More broadly, it is cognizant of the contribution that efficient debt funding can make to the Government’s ESG objectives.
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