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Australia not going to 'slow down' to let New Zealand catch up

Thursday 4th March 2010

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New Zealand faces a herculean task in achieving the government’s aspiration to close the gap with Australia, and the so-called ‘lucky country’ isn’t going to bend over backwards to help its trans-Tasman neighbour catch up. 

BT Financial Group chief economist Chris Caton, who’s touring New Zealand in a roadshow hosted by Westpac Banking, told investors at a meeting in Wellington it’s “very very difficult” for New Zealand to grow at a faster pace than Australia, especially when starting from “20% behind.” 

“We would have to have a very bad 10 years where we grow at 1% and you would have to have a very good 10 years at 3%, and that’s not going to happen,” he said. “We’re not going to slow down to help you.” 

Prime Minister John Key has staked out the ground in defence of his goal to catch Australia, hinting at New Zealand’s untapped mineral resources and water reserves as a means to surpass the trans-Tasman neighbour.

He gave the central bank governor a public dressing down after Alan Bollard said the goal was highly unlikely, and that New Zealand should be happy with the “crumbs” off Australia.  

The difference between the neighbouring countries is becoming more apparent to investors as Australia’s central bank continues to move its monetary policy settings towards a more neutral status, while the RBNZ keeps indicating it won’t hike rates until the middle of the year.  

Khoon Goh, senior economist at ANZ National Bank, said aside from this month’s National Bank Business Outlook survey, the local data has been fairly downbeat, and people have realised that New Zealand’s economy isn’t “chugging along” yet.  

The kiwi dollar sank to a nine-year low against its trans-Tasman counterpart yesterday, and recently traded at 76.59 Australian cents from 76.79 cents yesterday.

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