Economic Rapid escalation - August 2021 - Westpac
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Economic Overview August 2021. New Zealand economy 01 Global economy 04 Inflation and the RBNZ 06 Agricultural outlook 08 Exchange rates 09 Special topic: Life after vaccination 10 Economic and financial forecasts 11 The economy in six charts 12 Contributing authors Michael Gordon Satish Ranchhod Nathan Penny Paul Clark Gregorius Steven Acting Chief Economist Senior Economist Senior Agri Economist Industry Economist Economist +64 9 336 5670 +64 9 336 5668 +64 9 348 9114 +64 9 336 5656 +64 9 367 3978 Note from Michael. Our forecasts have been through some rapid changes since our May Economic Overview, as the New Zealand economy has revealed new facets to its post-Covid recovery. While our most regular readers won’t be too surprised by what they find here, it’s nonetheless a welcome chance to catch our breath and take stock of the landscape. We’ve noted for some time that Covid-19 has been constraining the supply side of the economy. That’s included rising prices for materials, disruptions to global manufacturing and shipping, and the loss of access to migrant workers due to the border closure. What was lacking, even up until a few months ago, was a sense that businesses were able to pass on cost increases, or to bid up pay rates to attract local workers. But that’s changed in a big way. It’s now clear that demand is running hot as well, and that means the stimulus the Reserve Bank provided last year to support the recovery is no longer needed. We expect the Reserve Bank to begin raising the OCR from its record low over the coming months. That would put it well ahead of its overseas peers, but that’s a fair reflection of the unique circumstances that New Zealand faces. Our Covid elimination approach has allowed the economy to gather a head of steam, more so than we’ve seen elsewhere. As we release this, I will have just had my first Covid jab. Mass vaccination is going to be crucial to the quality of life that we can enjoy in the coming years. But as the more contagious Delta variant grips the world, it’s clear that the battle won’t end there. Our special topic looks at the additional measures we may need to consider here, based on what’s emerging overseas. Michael Gordon - Acting Chief Economist Text finalised 13 August 2021 ISSN 1176-1598 (Print) ISSN 2253-2897 (Online) For address changes contact: WNZResearch@westpac.co.nz
New Zealand economy. Well, that escalated quickly. The New Zealand economy has been charging ahead and has built up a head of steam. However, the rapid turnaround in activity over the past year has left the economy grappling with significant growing pains. At the same time, we are still wrestling with Covid-related headwinds. The New Zealand economy has surpassed all expectations Of course, there are still some soft spots. Most notably, the in recent months, with domestic activity growing in leaps continued closure of our borders has meant that spending and bounds. The economy powered through summer even in sectors like travel, accommodation and entertainment without the usual peak in tourists, and it looks to have gained still remains someway below pre-Covid levels. This has also further momentum on top of that. There has also been a much meant that the recovery has been uneven across regions: faster than expected tightening in the labour market, with international tourist hotspots like Queenstown have lagged unemployment dropping to just 4% in the June quarter, equal regions which have a larger agricultural backbone and those to the cycle low that we saw in 2019. that focus on providing services for the domestic economy. Figure 1: Economic activity by sector, June years Overdrive. Annual average % change Annual average % change 25 25 The economy is set to continue growing at a brisk pace 2018 2019 2020 2021(f) over the coming year, with businesses in the construction, 20 20 manufacturing and services sectors all reporting solid levels of 15 15 forward orders. The continuing, albeit tenuous recovery in the 10 10 global economy also bodes favourably for export earnings. 5 5 0 0 -5 -5 The extraordinary amount of stimulus rolled out following last year’s Source: -10 Stats NZ, -10 Westpac -15 -15 GDP (production) Household spending Residential construction Business investment Government spending Exports lockdown is still flowing through the economy’s veins. Our strong economic performance over the past year owes much to the fact that we’ve been able to effectively eliminate Covid on our shores and keep it out. That’s allowed local Reinforcing this firm outlook for demand, fiscal spending households and businesses to operate largely free from over the coming years is likely to be even higher than was restrictions. At the same time, the extraordinary amount of assumed in the most recent Budget. The strength in economic monetary and fiscal stimulus that was rolled out last year conditions has meant that, despite the large increases in when the nation was in lockdown is still flowing through spending over the past year, the fiscal accounts are in much the economy’s veins. Combined, these conditions have better shape than had been expected. That’s giving the supercharged domestic demand: household spending has Government greater scope to pursue its social objectives, surged, construction is booming, and across the business while still remaining on course to achieve its debt targets. sector there has been a lift in trading activity, along with We expect the next few years will see increased spending on increases in plans for capex and hiring. wages and salaries in the public sector, as well as on social support measures. The Government could also increase its And it’s not just domestically focused industries that are capital spending programme, adding to the large amount of showing strength. As discussed in the Agricultural outlook infrastructure spending that is already planned. section, we’re also seeing firm demand for our key commodity exports, with export prices up 24% over the past year. Some With demand running hot, the spare capacity that developed of the resulting lift in farm and orchard incomes is being in the wake of last year’s outbreak has been absorbed and used for debt repayment. But we’re also seeing increases in signs that the economy is running hot are widespread. Wages spending in the regions, along with a lift in rural land sales. and costs of production have been rising. Combined with firm Economic Overview August 2021 | 01
demand, that has resulted in a significant lift in consumer substantially lower than those we saw over the past decade, price inflation to 3.3%, with a further rise expected over the with the Government having signalled its intention to tighten coming year. We’re also seeing supply bottlenecks delaying entry requirements over time. As a result, we now expect activity in a number of industries, including construction that the strength in demand will see unemployment fall to and retailing. 3.5% by the middle of next year – its lowest level in more than a decade. We also expect annual wage inflation will rise to 2.7%, with larger increases for many in-demand occupations. Figure 2: Government consumption share of GDP % of GDP % of GDP One of the other significant challenges that businesses 24 Labour National Labour National Labour 24 have been wrestling with are ongoing disruptions to global 1984-1990 1990-1999 1999-2008 2008-2017 2017- 23 23 shipping and supply chains. That’s resulted in deliveries of raw 22 22 materials failing to keep pace with orders in recent months. It’s also contributed to shortages of many consumer goods as 21 21 household spending has picked up. 20 20 19 19 Disruptions to global manufacturing and shipping now look like 18 18 they will be more persistent than previously anticipated. The Westpac spread of Covid and its variants continues to disrupt economic 17 forecasts 17 Source: Stats NZ, Westpac activity in many regions, particularly in Asian economies that 16 16 are major producers of finished consumer goods. At the same 1987 1991 1995 1999 2003 2007 2011 2015 2019 2023 time, demand is picking up in large economies like the US, and shipping companies have diverted capacity away from The challenge that businesses have most frequently New Zealand towards more profitable routes. highlighted is that it has become increasingly difficult to source the labour that they need. This has been a particular issue The faster than expected turnaround in economic activity in relation to workers with specialised skills in sectors like and emergence of strong inflation pressures means that the construction and IT. However, reports of labour shortages have Reserve Bank can now start removing some of the stimulus it been widespread across industries, skill levels and regions. introduced in the wake of last year’s lockdown. As discussed in the Inflation and the RBNZ section, we think that a series of Difficulties sourcing staff have been mounting ever since interest rate hikes is on the cards over the coming years. the borders were closed last year. However, tightness in the labour market isn’t just a supply side issue. The strength in Over time, increases in borrowing costs will slow the pace economic activity has seen the demand for workers surging, of economic growth and dampen inflation. This will also with labour turnover rising sharply as employers have bid up result in a change in the makeup of the economy through the wages to attract staff away from other firms. middle part of the decade: government spending will account for a larger share of activity, and private consumption and investment a smaller share. Figure 3: Proportion of businesses reporting a rise in staff turnover (past three months) Please keep your mask on at all times. Net % Net % 40 40 Despite the economy’s enviable run over recent months, the 30 30 risks associated with Covid have not gone away. That point 20 20 was made very clearly in July, with the popping of the trans- 10 10 Tasman travel bubble. 0 0 For New Zealand, the continued spread of Covid and its more -10 -10 virulent variants has a number of important implications. First -20 -20 is that border restrictions are now expected to remain in place -30 -30 for longer than previously assumed, with the suspension Source: NZIER of the trans-Tasman travel bubble potentially extending -40 -40 2000 2003 2006 2009 2012 2015 2018 2021 well beyond the initial 8 weeks that’s been stipulated. More generally, widespread travel with other countries is unlikely to open before mid-2022. And even then, border openings are In response to the growing tightness in the labour market, likely to be gradual and on a selected risk-based basis. As a the Government has made some changes to visa programmes result, industries that are closely linked to the international for migrant workers who are already in the country and border, like tourism and accommodation, are likely to face those coming as part of the Recognised Seasonal Employer tough trading conditions for some time yet. programme. Even so, we won’t realistically see a material easing in labour shortages until the borders are reopened to But it’s not just tourism and travel that will be affected by new skilled migrants, and that is still some way off. Even when ongoing health concerns abroad. The flare up in infections the borders do reopen, migration levels are likely to remain may mean that demand in some of our trading partner 02 | August 2021 Economic Overview
economies will take even longer to recover, adding to the We expect that house prices will continue to rise over the challenges for our exporters of manufactured goods. coming year, but that the pace of increase will slow as mortgage rates lift from their recent lows. Longer term, The bigger question is what would happen if we had another mortgage rates are set to continue rising, back towards more outbreak onshore. Over the past year, we have had periods average levels. After the recent period of very low mortgage where the Alert Level was dialled up in some regions. While rates, that’s likely to take some of the steam coming out of that did cause some disruptions, economic activity has proven the housing market. And combined with changes to the tax to be fairly resilient, with increases in the Alert Level often system, the middle part of the decade is likely to see some resulting in spending being delayed, rather than cancelled. modest price declines. However, the Delta variant is proving to be more contagious Figure 4: House prices and household spending and harder to contain. Should it arrive on our shores, this raises the risk that health restrictions could be imposed for longer Annual % change Annual % change 45 15 or that they are stricter than during previous incidents. That Source: QVNZ, Stats NZ, Westpac Westpac would risk major disruptions to economic conditions and the 35 forecasts 10 labour market. It would also raise the possibility that additional 25 monetary and fiscal stimulus could be (re)introduced. 15 5 5 0 The house always wins. -5 -15 -5 The combination of record low interest rates and significant -25 Per capita consumption spending (right axis) increases in fiscal spending since the start of the pandemic -10 -35 House prices (left axis) has given domestic demand a powerful boost. That’s been -45 -15 seen particularly clearly in the household sector, with retail 1995 2000 2005 2010 2015 2020 2025 spending now running well above the levels that prevailed prior to Covid-19. Recent months have seen notable strength in spending on household durables, like furnishings and The strength in house prices has also placed a rocket under appliances. There has also been a pick-up in spending on the residential construction sector. Dwelling consent issuance activities such as hospitality and dining out (which fell sharply has risen to record levels, and there is a very large pipeline of following last year’s outbreak). work planned over the coming years. Much of this work will be in Auckland, however homebuilding has been ramping up Reinforcing the lift in households’ spending appetites around the country. has been the strength of the housing market. Record low mortgage rates have boosted demand from both owner The pickup in construction activity now in train follows an occupiers and investors, and house prices have risen more extended period where home building failed to keep pace than 30% over the past year. Gains have been widespread, with population growth. But with the borders now closed, net with particular strength in central North Island regions like migration and population growth have plummeted. And with Whanganui-Manawatu. the record amount of building that is occurring, the shortages of housing that developed in many parts of the country over the past decade are being eroded rapidly. Even when the borders do open, the physical balance between demand and Home building is surging, and the supply of housing is likely to look very different from what we shortages that built up in recent years have seen for some time. are now being rapidly eroded. Figure 5: Building consents and population changes Number Number 140000 70000 The rapid pace of house price gains has exacerbated concerns Population (annual change, left axis) Westpac forecasts about housing affordability and the risks for financial stability. 120000 Consents (annual, right axis) 60000 In response, the Reserve Bank has already tightened loan 100000 Source: Stats NZ, Westpac 50000 to value lending restrictions twice this year, and a further 80000 40000 tightening has been proposed. In addition, the Government has announced significant tax reforms that will erode the 60000 30000 incentives to invest in residential property. 40000 20000 The above changes are expected to have a dampening impact 20000 10000 on the housing market over time. However, to date their impact 0 0 has been limited, with prices continuing to rise at a brisk pace 2000 2005 2010 2015 2020 2025 in recent months. Notably, while investors have stepped back from the market, owner-occupiers have filled the void. Economic Overview August 2021 | 03
Global economy. The bumpy road to recovery. The more infectious Delta variant of Covid is expected to be a bump in the road for our major trading partners, but the underlying story is one of strengthening demand. Countries with higher vaccination rates and a trend towards re-opening have not been as affected. Some countries are seeing capacity pressures build as demand strengthens and some central banks have responded by becoming more hawkish. The spread of the more infectious Delta variant has changed In contrast, the Delta variant has put a spanner in the works of our expectation for growth among New Zealand’s main China, Australia, and neighbouring Southeast Asian countries’ trading partners. On balance, we expect the Delta variant elimination strategies. Cities and regions in many of these will prove to be a bump in the road to recovery, rather than countries have returned to lockdown, and there has been signalling an outright change in trajectory for global growth. a subsequent impact on economic activity and a lowering As a result, we have lowered some of our growth estimates of growth forecasts. These events are in stark contrast to for 2021, but have offset those changes by lifting growth 2020 when countries in the region were held up as Covid over 2022. containment success stories. Despite a downgrade for growth in 2021 to 6.1% from 6.5%, the overall picture for the US has stayed relatively constant, The Delta variant is expected to be a and our forecast for growth in 2022 has been upgraded to bump in the road to recovery rather 4.3% from 4.1% previously. Part of this is due to a similar story as Europe and the UK of higher vaccination rates and a change than signalling a change in trajectory. in strategy towards learning to live with Covid. Figure 7: Global GDP growth Looking across our main trading partner economies, growth projections for Europe and the UK have been revised higher Annual average % change Annual average % change 12 12 due to the easing of Covid restrictions and a lower likelihood 10 2018 2019 2020 2021(f) 2022(f) 10 of more stringent lockdowns in the future. This is because 8 8 of high vaccination rates and a change in strategy towards 6 6 learning to live with Covid, rather than elimination. European 4 4 GDP growth has been upgraded to 4.5% (from 4.2%) and 2 2 4.4% (from 4.0%) for 2020 and 2021 respectively. 0 0 -2 -2 -4 -4 Figure 6: Global Purchasing Manager Indices -6 -6 Source: IMF, -8 Stats NZ, -8 Westpac Index Index 60 60 -10 -10 New Zealand US Europe China Other Asia 55 55 50 50 While it is still early days, the recent divergence between 45 45 economies in the Western hemisphere and those in the Asia- 40 Manufacturing 40 Pacific highlights the importance of effective vaccines and 35 Services 35 high vaccination rates, as well as the importance of strategies 30 30 for learning to manage Covid long term (we discuss this more 25 25 in our Special topic). Source: Bloomberg, J.P. Morgan 20 20 Aug 2018 Feb 2019 Aug 2019 Feb 2020 Aug 2020 Feb 2021 Aug 2021 Financial markets have largely shrugged off the recent flare ups in Covid with long-term bond yields falling since the May Economic Overview. However, this doesn’t appear to be driven 04 | August 2021 Economic Overview
by a shift in monetary policy expectations, but rather growing High vaccination rates and a change of strategy towards confidence that central banks will do what is needed to keep reopening has been supportive of the US labour market, and inflation in check. This has been corroborated by the rise in this has helped boost incomes and demand in the economy. short-term interest rates as central banks in some regions The combination of much stronger than anticipated demand have begun to contemplate removing stimulus as demand has and continued supply constraints has put pressure on prices picked up. and wages. This strength has come from a strong consumer, business investment, and residential investment. Figure 8: 10-year government bond yields Figure 9: Share of population who have received at least % % one Covid-19 vaccine 2.00 2.00 US Germany 1.50 UK Australia 1.50 % % 70 70 Source: Our World In Data 1.00 1.00 60 60 0.50 0.50 50 50 40 40 0.00 0.00 30 30 -0.50 -0.50 Source: Bloomberg 20 20 -1.00 -1.00 Apr 2020 Jul 2020 Oct 2020 Jan 2021 Apr 2021 Jul 2021 10 10 0 0 World US Europe China Australia NZ An important pivot came from the US Federal Reserve in their June statement which hinted at tightening policy. As a result, we’ve moved forward our expectations of the Fed reducing Another place where consumers have played a major role in their bond buying programme and raising interest rates. This the recovery is China. Part of this has been a result of being largely reflects the US growth story remaining intact. able to re-open quickly, which meant growth has picked up sooner. As the world continues to open up, Chinese Despite the reinstatement of lockdown restrictions, the consumers should see incomes rise as global trade increases. RBA did not ease policy or delay their plan to reduce bond In addition, stronger than expected investment by the private purchases in September. This contrasted with financial market sector highlights the confidence of businesses and the expectations that the RBA would delay their reduction of bond financial sector in funding them. Measures of credit expansion purchases. The RBA’s actions highlight their assumption that remain supportive and are around 2019 levels. the recent lockdown is a bump in the road to recovery, rather than a directional change for the economy. Despite the strength of the Chinese economy since the initial Covid outbreak in 2020, there remains the risk of further sudden sharp lockdowns in China and neighbouring countries. For example, Wuhan has gone back into lockdown as the Central banks have been more hawkish authorities try to contain the spread of Delta. Neighbouring indicating their willingness to keep countries like Indonesia have also returned to lockdown. inflation at bay. Australia, which had been a model for getting Covid under control, has also recently returned to lockdown. As Australia has one of the lowest vaccination rates, this highlights the The ECB on the other hand has continued to signal that ongoing economic risk posed by Covid, especially given the monetary policy will remain accommodative. They are more adverse impacts of the variants that have emerged. concerned about derailing growth by tightening policy too early. However, the Pandemic Emergency Purchase Prior to the outbreak of the Delta variant, the Australian Programme, put in place when Covid emerged in 2020, is only economy was recovering firmly. The economy overall was set to run until March 2022 and is not being renewed. As a facing capacity constraints which led to increased cost result, we expect a reduction in the rate of purchases under pressures. Accommodative fiscal policy has supported this programme in September. business investment and residential investment. Along with strong consumption, this has led to a tightening The Fed has shown greater confidence in the US economy, labour market. forecasting unemployment to fall below its long run average over the next two years. This signals that the labour market is expected to tighten, which should lead to wage inflation. This was an important development as wage inflation could transmit into a feedback loop of a rise in general prices, leading to sustained inflation. Economic Overview August 2021 | 05
Inflation and the RBNZ. No regerts. Covid-related supply constraints are now being compounded by strong domestic demand, and recent price pressures could become more sustained if left unchecked. As a result, we expect the Reserve Bank to start removing policy stimulus over the coming months. That does carry risks, as the world continues to grapple with Covid. However, the Reserve Bank has judged that the risk of waiting too long is even greater. At the time of our last Economic Overview, there was no Where price rises came through most consistently wasn’t in shortage of stories about firms facing rising cost pressures the more import-heavy components, but in labour-intensive and difficulties in finding labour. What was missing, though, services. That highlights the extent to which labour shortages was a sense that they were able to pass these costs on to their and wage pressures have built up in recent months. It also customers, or that they were in a position to pay up to attract represents a source of inflation that’s potentially more workers. Indeed, inflation remained subdued in the March persistent and harder to dislodge. quarter, as did wage growth. Figure 11: Selected labour-intensive services in the CPI Since then the situation has changed rapidly. As we detail in the New Zealand economy section, domestic demand has % % 6 6 built up a real head of steam. It remains the case that some of Source: Stats NZ, Westpac Quarterly the sources of cost pressures (such rising commodity prices, 5 Includes dining out, clothing services, household services, vehicle repairs, 5 global supply chain disruptions and higher shipping costs) Annual vet services and hairdressing are likely to be temporary, or at least non-repeating. But 4 4 when these kinds of supply-side factors run up against strong 3 3 demand, they can provide the spark for a more sustained period of higher inflation – unless that is met by a central 2 2 bank response. 1 1 This intersection of supply constraints and strong demand has been evident in the recent data. Consumer prices rose 0 0 2007 2009 2011 2013 2015 2017 2019 2021 by 1.3% in the June quarter, lifting the annual inflation rate to 3.3%, the highest in a decade. There were some especially large contributions from a few categories, such as petrol and We expect annual inflation to peak at 3.8% in the September newly-built homes. But the various measures of ‘core’ inflation quarter this year, and to remain above 3% through to the early were also on the higher side of the Reserve Bank’s target. part of next year. Some of that strength is due to base effects: the sharp rise in prices in the June quarter will boost the annual Figure 10: Consumer price inflation rate for the coming year, just as the price falls during the Covid lockdown kept the annual rate low over the previous year. Annual % Annual % 6 6 Westpac forecasts 5 5 We expect inflation to settle around 4 4 the RBNZ’s target from late 2022 – 3 RBNZ target band 3 conditional on higher interest rates. 2 2 1 1 As we move towards the end of 2022, we expect inflation to 0 Source: Stats NZ, Westpac 0 settle around the 2% midpoint of the RBNZ’s target band, 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 which itself would be a more sustained period of inflation than we’ve seen for some time. However, those forecasts are 06 | August 2021 Economic Overview
predicated on a rise in interest rates over the next few years; there is nothing to stop the RBNZ from immediately reversing in the absence of action by the RBNZ, there would be a greater any rate hikes it had made. Again, the economic cost of a brief risk of inflation expectations becoming unanchored, and a period of higher interest rates would be minimal, and the spiral of larger wage and price increases taking hold. ‘regret’ would largely be felt by the RBNZ itself in terms of the cost to its reputation. In light of these risks, we’ve significantly brought forward our forecasts of interest rate hikes since our last Economic The RBNZ has already ended its Large-Scale Asset Purchase Overview. We expect the RBNZ to increase the OCR by 25 basis programme, almost a year ahead of plan. Ending the points at each of the next three reviews in August, October and programme itself didn’t amount to a meaningful tightening of November, which would take the cash rate to 1% by the end policy, as the pace of purchases had already been scaled back of this year. (With the August review looming as we publish, significantly over recent months. The RBNZ has suggested we should note that our general view on the path of monetary that its holdings of government bonds will continue to have an policy doesn’t rest crucially on what happens on that date.) easing effect on financial conditions even after the purchases have stopped. But we’re sceptical of this – even before the Further ahead, we expect a more gradual series of hikes over programme ended, there was little evidence that the yield the next couple of years, with the OCR reaching a peak of curve was being held down lower than normal relative to the 2% in late 2023. This is broadly in line with what the RBNZ level of the OCR. considers to be a ‘neutral’ level for the cash rate. At this stage we don’t think it will be necessary to go above neutral in the We expect that OCR hikes will be transmitted as normal current cycle, but that will depend on how successful the through to the longer-term interest rates faced by borrowers upcoming hikes are in dampening demand pressures and and depositors. Mortgage rates for the most popular fixed house prices. terms have already started to rise in anticipation, and we expect a typical two-year mortgage rate to reach about 4% The speed at which market opinion has turned towards by the end of next year. That would take them back to where imminent OCR hikes has raised a few eyebrows. Hiking now they were in early 2019 – not too onerous for most existing would put the RBNZ far ahead of its peers – we expect the US borrowers, but high enough to substantially change the Federal Reserve to hold off until late 2022, and the Reserve arithmetic for future house purchases compared to what Bank of Australia until early 2023. What’s more, the world we’ve seen in the last year or so. economy is still grappling with newer and more dangerous variants of Covid-19. And if an outbreak were to happen here, Figure 12: OCR and two-year mortgage rate forecasts while our level of vaccination is still low, it’s likely that we’d be plunged back into a strict lockdown. % % 8 OCR 8 Westpac forecasts Indeed, we were surprised by the RBNZ’s hawkish turn at its 7 Two-year fixed mortgage rate 7 July monetary policy review. Since the onset of Covid, the 6 6 RBNZ has described its policy decisions in terms of a ‘least 5 5 regrets’ framework. Initially, that meant doing everything that it could to support the economy’s recovery; earlier this 4 4 year, it meant waiting until it was certain that inflation and 3 3 employment were on track before tightening. But by July signs 2 2 of a faster than expected pickup in demand were widespread. 1 1 As a result, the RBNZ concluded that the risk of waiting Source: RBNZ, Westpac too long, and letting inflation pressures get out of hand, 0 0 2010 2012 2014 2016 2018 2020 2022 2024 outweighed the risk of another Covid shock in the near term. Financial market forecasts (end of quarter) The RBNZ has concluded that the risks CPI 90-day 2 year 5 year of waiting too long to deal with inflation inflation OCR bill swap swap outweigh the risks of another Covid Sep-21 3.8 0.50 0.90 1.30 1.60 shock in the near term. Dec-21 3.4 1.00 1.10 1.40 1.75 Mar-22 3.2 1.00 1.20 1.50 1.90 Jun-22 2.3 1.25 1.35 1.60 2.00 The difficulty with a ‘least regrets’ approach is that it’s Sep-22 1.9 1.25 1.45 1.70 2.10 subjective; two reasonable people can come to opposite Dec-22 2.1 1.50 1.60 1.80 2.20 conclusions. On the one hand, waiting a few months would Mar-23 2.0 1.50 1.70 1.90 2.30 make little difference in terms of economic outcomes, but it Jun-23 1.8 1.75 1.85 2.00 2.40 would make a big difference in terms of our vaccination rate and our ability to deal with a Covid outbreak. On the other Sep-23 1.8 1.75 1.95 2.10 2.50 hand, if New Zealand were forced into a Covid lockdown, Dec-23 1.9 2.00 2.10 2.15 2.55 Economic Overview August 2021 | 07
Agricultural outlook. Passing the baton. Overall, agricultural commodity prices are at record highs. However, the price baton is passing between export sectors as the global economic recovery gathers steam. In short, we believe that it’s the meat sector’s turn to shine. Commodity prices hit fresh record highs in each month from Dairy farmers have thus had time to respond to improved March through June, and were higher again in July with the prices. New Zealand autumn production was massive. For the exception of dairy. three months to May, production jumped a whopping 10% on the same three months a year ago. This massive increase We are now seeing the price baton passing between export in supply explains most of the price correction. And with this sectors, with the prices for some premium products heating price fall coming earlier than we expected, we have trimmed up as the global recovery gathers steam. Notably, the exports our 2021/22 farmgate milk price forecast down to $7.75/kg. that rely on food service outlets are receiving a boost as more people get vaccinated and then return to restaurants, pubs Forestry prices have also been hot, setting a record high in and cafes. June. This strength has been due to a combination of surging Chinese demand and tight supply, including the Chinese ban on As such, we think it’s the meat sector’s turn to shine. In Australian timber. However, high shipping costs are eating into August, (prime) beef and lamb prices cracked $6.00/kg returns, and we expect little relief on this front in the short-term. and $9.00/kg, respectively. Similarly, venison prices have jumped nearly $0.70/kg since May, while fine wool prices have Horticulture also continues to benefit from very high prices. bounced back to pre-Covid levels. Over the rest of 2021, we However, kiwifruit supply is lifting strongly, and prices have expect overall meat and wool prices to make further gains, eased a touch. While apple prices are holding up better, on with beef and lamb prices set to hit record highs. balance, we expect horticulture prices to drift lower from here. Meanwhile, dairy commodity prices are taking a back seat. Over the coming months, we expect commodity prices to Overall dairy auction prices have now fallen for eight auctions recede from their record highs, as lower dairy prices offset in a row. Although, recall that dairy prices recovered from strength elsewhere. From 2022, we expect to see a more their Covid hit early, with prices surging by over 40% in late uniform agricultural supply response and for overall prices to 2020 and early 2021. moderate. However, despite this moderation, prices are set to remain historically high through 2022. Commodity price monitor Next 6 Sector Trend Current level 1 months Strong New Zealand production and Delta variant concerns have put a dent in high global dairy prices. We’ve Dairy Above average trimmed our 2021/22 forecast to $7.75/kg. Prices are on the up and with more and more people vaccinated we expect that global beef demand will rise, Beef Average with prices likely to set record highs. With more and more people vaccinated, we expect global lamb demand to rise further. With lamb prices Lamb/Mutton High already at $9.00/kg, $9.50/kg is in sight. Prices have steadily increased this year. However, high shipping costs are eating into returns, and we expect Forestry High little relief on this front in the short-term. To date, kiwifruit prices have eased on extra supply, but remain very high. With a smaller crop, apple prices Horticulture High are holding up at very healthy levels. Prices have turned up decisively on improved global demand. Fine wools have jumped back to pre-Covid Wool Low levels and coarse wool prices are lifting too. 1 NZ dollar prices adjusted for inflation, deviation from 10 year average. 08 | August 2021 Economic Overview
Exchange rates. Fundamentals will come to bear. The New Zealand dollar has faced headwinds in recent months, but this is expected to reverse in the near term. Strong economic fundamentals are leading to capacity pressures, and a more hawkish RBNZ provides upside risk for the currency. Interest rate differentials and commodity prices are also expected to be supportive of the kiwi. The New Zealand dollar has drifted lower since the May has already tightened some aspects of monetary policy, and is Economic Overview. Most of the fall has been due to a strong expected to increase interest rates in the next few reviews. US dollar, which has appreciated by about 3% against global currencies. The rebounding US economy has underpinned USD Despite the re-emergence of Covid in Australia, the AUD strength, cemented by signals from the US Federal Reserve hasn't had a sharp depreciation against most currencies. back in June that it was considering tightening policy settings. This could be because financial markets think that economic activity will bounce back once lockdowns are lifted. In addition, concerns about the spread of the Delta variant have meant some countries are back in lockdown, including Figure 13: NZ dollar exchange rate vs major countries those in the Asia-Pacific region. This development led the Asian Dollar Index, a basket of Asian currencies measured Index = 100 in Jan 2020 Index = 100 in Jan 2020 115 115 against the US dollar, down by about 1%. The AUD also suffered, sliding 4.5% and dragging the NZD (down 2%) 110 110 with it. 105 105 The New Zealand dollar’s fall came despite the economy 100 100 gathering steam over recent months. This strength and an 95 95 associated uplift in inflation has meant that the RBNZ has US dollar UK pound taken the first steps to tighten monetary policy. Commodity 90 90 prices have also been very strong, and we discuss these Australian dollar Japanese yen 85 85 trends more in the Agricultural outlook section. Source: Bloomberg Chinese yuan 80 80 Jan 2020 Jul 2020 Jan 2021 Jul 2021 However, we expect that eventually the NZD is likely to lift on these fundamental factors. The New Zealand economy is outperforming most of its peers. And, reflecting this outperformance, the RBNZ is poised to lift the OCR in advance of other key central banks. As a result, interest rate differentials should provide a tailwind for the NZD, and we have upgraded our NZD forecast over coming quarters Exchange rate forecasts (end of quarter) despite an initially lower starting point. NZD/ NZD/ NZD/ NZD/ NZD/ TWI USD AUD EUR GBP JPY We also expect that red hot commodity prices will continue Sep-21 0.71 0.95 0.59 0.50 78.8 74.4 to provide support to the New Zealand dollar. New Zealand’s overall commodity prices hit record highs in June. And while Dec-21 0.74 0.95 0.61 0.52 82.1 76.4 the price baton is now passing between dairy and meat export Mar-22 0.76 0.95 0.62 0.53 85.1 77.5 prices, we expect commodity prices to remain very high over Jun-22 0.77 0.94 0.63 0.53 86.2 77.9 the remainder of 2021 and into 2022. Sep-22 0.77 0.94 0.64 0.53 86.2 77.7 The stronger outlook for the New Zealand economy has led Dec-22 0.77 0.94 0.64 0.53 87.0 77.6 us to upgrade our forecast for the NZD/AUD cross. Like the Mar-23 0.76 0.94 0.63 0.53 85.9 76.8 USD story, New Zealand is facing greater capacity pressures Jun-23 0.75 0.94 0.63 0.52 85.5 76.0 compared to Australia. Part of this has been our success in Sep-23 0.74 0.94 0.62 0.52 84.4 75.1 containing Covid, which has supported a faster recovery in activity. The RBNZ is currently more hawkish than the RBA as it Dec-23 0.73 0.94 0.61 0.51 84.0 74.3 Economic Overview August 2021 | 09
Special topic. Getting to the pointy end: Life after vaccination. New Zealand’s plan for dealing with Covid-19 depends crucially on a high level of vaccination. But the more serious Delta variant means it’s likely that ongoing controls, as well as high vaccine coverage, will be needed as we reopen our border. We consider some of the ways that this might play out, based on what we’re seeing in other countries as they learn to manage Covid long-term. (Vac)cine but not herd. vaccination this year, it’s unlikely that we’ll be able maintain this pace every year. The flu jab is likely to be the model here Widespread vaccination is central to the world’s fightback on an ongoing basis, with a focus on high coverage for the against Covid-19. The ideal outcome would be to vaccinate older cohorts who are by far the most vulnerable. enough of the population to reach ‘herd immunity’, the point at which the virus’ reproduction rate falls below 1. Beyond this New Zealand will need to maintain its testing and contact threshold, any outbreaks will tend to burn out on their own, tracing capabilities, and probably beef them up to handle the as the virus won’t be able to find enough new hosts to spread return of overseas visitors. The ability to restrict movements itself to. and large gatherings will remain part of the toolkit, though they may only need to be used in a localised way. At the start of the year, that goal looked challenging but achievable. But it’s clear that the Delta variant is different The use of masks, and stay-at-home orders for people who enough to change the game: it’s much more contagious, test positive, have proven to be helpful in reducing the spread and vaccines are less effective at preventing infections of Covid. The tricky part is to what extent they should be made (they are still highly effective, but not perfect, at avoiding mandatory, and if so, who bears the cost of enforcing them. severe illnesses and deaths). Modelling shows that as Delta Stay-at-home orders would mean more absenteeism than becomes the dominant variant, herd immunity would require we’ve had before, which will have implications for workplaces. vaccinating over 90% of the population, which puts it out of reach in practical terms. Papers, please. That’s certainly not reason to despair about the prospects of The world is moving towards proof of vaccination as a reopening our borders. What it does mean is that vaccination requirement for international travel, and New Zealand alone won’t be sufficient – enough of the population would will inevitably need to align with this. This is actually quite still be susceptible to the spread of Delta that it could lead to complex, as it requires being able to verify documents that unacceptable health outcomes. To avoid that, it’s likely that have been issued by hundreds of national or state authorities. additional controls will be needed on an ongoing basis. Such The International Air Transport Association is working with controls need not be onerous, and the cost of enforcing them airlines to develop a global standard. would be well worth it if they obviate the need for lockdowns. More controversial is the idea of vaccine ‘passes’ for In a way, the rest of the world is moving towards the same internal movements, such as entering tourist attractions, conclusion. The difference is that for most countries, that large gatherings or indoor dining. Governments may be represents a move towards reopening their economies and understandably reluctant to impose this kind of segregation fewer (but still some) restrictions, whereas for us it would (though France is a notable early adopter). But it’s the mean more restrictions compared to what we currently private sector that is leading the way here, with the implicit enjoy. Hence, we can look overseas as a guide to some of the endorsement of their customers. In countries where the control measures that might emerge here. The Government majority of people have been vaccinated, surveys show that has recently set out its preferred path towards reopening the the idea of a Covid pass is fairly popular – once people have border, but that could evolve as conditions change – as the done what they can to protect themselves, they like the idea of saying goes, no plan survives its first contact with the enemy. not having to mingle with the unvaccinated. Increasingly, large firms are also introducing vaccination requirements for their There’s a growing view that Covid-19 will become endemic, and employees. In part this is about getting workers back into the like influenza, may require booster shots every year to deal office safely, as support for working remotely is waning. with new variants. And while we may be able to reach 80%+ 10 | August 2021 Economic Overview
Economic and financial forecasts. New Zealand forecasts GDP components Quarterly % change Annual average % change Jun-21 Sep-21 Dec-21 Mar-22 2020 2021 2022 2023 GDP (production) 1.5 0.9 0.9 0.2 -2.9 6.4 3.1 2.6 Private consumption 0.3 1.7 1.3 0.0 -1.9 11.2 2.4 1.1 Government consumption 1.2 1.1 1.1 0.9 6.4 5.9 3.7 2.5 Residential investment 2.0 1.8 1.5 1.2 -4.1 19.9 4.7 0.6 Business Investment 1.7 0.6 -0.8 1.6 -9.0 12.1 4.1 5.1 Exports 9.7 1.0 1.6 0.0 -11.8 -2.8 7.1 7.8 Imports 4.8 2.0 1.5 1.2 -16.4 17.7 6.0 4.3 Economic indicators Quarterly % change Annual % change Jun-21 Sep-21 Dec-21 Mar-22 2020 2021 2022 2023 Consumer price index 1.3 1.1 0.1 0.6 1.4 3.4 2.1 1.9 Employment change 1.1 0.5 0.4 0.3 0.7 2.6 1.5 1.7 Unemployment rate 4.0 3.8 3.7 3.6 4.8 3.7 3.5 3.7 Labour cost index (all sectors) 0.7 0.7 0.7 0.5 1.6 2.6 2.4 2.5 Current account balance (% of GDP) -3.3 -4.3 -4.6 -4.3 -0.8 -4.6 -4.4 -4.1 Terms of trade 3.6 1.0 0.8 -0.4 -1.6 5.6 -1.0 0.4 House price index 6.0 4.0 1.0 0.6 17.0 20.0 0.0 -3.6 Financial forecasts End of quarter End of year Jun-21 Sep-21 Dec-21 Mar-22 2020 2021 2022 2023 90 day bank bill 0.27 0.90 1.10 1.20 0.27 1.10 1.60 2.10 5 year swap 1.19 1.60 1.75 1.90 0.31 1.75 2.20 2.55 TWI 74.7 74.4 76.4 77.5 72.9 76.4 77.6 74.3 NZD/USD 0.72 0.71 0.74 0.76 0.69 0.74 0.77 0.73 NZD/AUD 0.93 0.95 0.95 0.95 0.94 0.95 0.94 0.94 NZD/EUR 0.59 0.59 0.61 0.62 0.58 0.61 0.64 0.61 NZD/GBP 0.51 0.50 0.52 0.53 0.52 0.52 0.53 0.51 Net core Crown debt (% of GDP) 31.0 33.1 34.8 36.7 32.5 34.8 41.0 43.6 International economic forecasts Real GDP (calendar years) Annual average % change 2017 2018 2019 2020 2021f 2022f Australia 2.4 2.8 1.9 -2.4 4.2 4.5 China 6.9 6.7 5.8 2.3 9.3 5.8 United States 2.3 3.0 2.2 -3.5 6.1 4.3 Japan 1.7 0.6 0.3 -4.8 2.5 2.7 East Asia ex China 4.7 4.4 3.7 -2.4 4.6 5.0 India 6.8 6.5 4.0 -8.0 9.2 8.3 Euro Zone 2.6 1.9 1.3 -6.6 4.5 4.4 United Kingdom 1.7 1.3 1.4 -9.9 6.5 5.0 NZ trading partners 4.1 4.0 3.4 -1.8 6.2 4.9 World 3.8 3.6 2.8 -3.3 5.7 4.7 Economic Overview August 2021 | 11
The economy in six charts. New Zealand GDP growth New Zealand employment and unemployment % % Annual % change % 15 Westpac 15 8 8 Employment growth (left axis) Westpac Quarterly % change forecasts forecasts 10 10 6 Unemployment rate (right axis) 7 Annual average % change 5 5 4 6 0 0 2 5 -5 -5 0 4 -10 -10 -2 3 Source: Stats NZ, Westpac Source: Stats NZ, Westpac -15 -15 -4 2 2004 2008 2012 2016 2020 2024 2004 2008 2012 2016 2020 2024 90 day bank bills, 2 year swap and 5 year swap rates Exchange rates % % NZD exchange rate Index 10 10 1.00 85 Westpac 9 90 day bank bill rate 9 forecasts 0.90 80 8 2 year swap rate 8 75 7 7 0.80 5 year swap rate 6 6 70 0.70 5 5 65 4 4 0.60 Westpac NZD/USD (left axis) forecasts 60 3 3 0.50 NZD/AUD (left axis) 55 2 2 0.40 TWI (right axis) 1 1 50 Source: RBNZ, Bloomberg, Westpac Source: RBNZ, Westpac 0 0 0.30 45 2004 2008 2012 2016 2020 2024 2004 2008 2012 2016 2020 2024 Official Cash Rate New Zealand house prices % % % % 4 4 35 35 Westpac Westpac Source: CoreLogic, Westpac forecast forecasts 30 30 25 Quarterly % change 25 3 3 20 Annual % change 20 15 15 2 2 10 10 5 5 1 1 0 0 -5 -5 Source: RBNZ, Westpac 0 0 -10 -10 2010 2012 2014 2016 2018 2020 2022 2024 2004 2008 2012 2016 2020 2024 12 | August 2021 Economic Overview
Contact the Westpac economics team. Michael Gordon, Acting Chief Economist Paul Clark, Industry Economist +64 9 336 5670 +64 9 336 5656 Satish Ranchhod, Senior Economist Gregorius Steven, Economist +64 9 336 5668 +64 9 367 3978 Nathan Penny, Senior Agri Economist Any questions email: +64 9 348 9114 economics@westpac.co.nz Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts. Disclaimer. Things you should know directly or indirectly into any restricted jurisdiction. This communication is made in compliance with the Market Abuse Regulation (Regulation(EU) 596/2014). Westpac Institutional Bank is a division of Westpac Banking Corporation ABN 33 007 457 141 (‘Westpac’). Investment Recommendations Disclosure Disclaimer The material may contain investment recommendations, including information recommending an investment strategy. Reasonable steps have been taken to ensure that the material is presented in This material contains general commentary, and market colour. The material does not constitute a clear, accurate and objective manner. Investment Recommendations for Financial Instruments investment advice. Certain types of transactions, including those involving futures, options and high covered by MAR are made in compliance with Article 20 MAR. Westpac does not apply MAR Investment yield securities give rise to substantial risk and are not suitable for all investors. We recommend Recommendation requirements to Spot Foreign Exchange which is out of scope for MAR. that you seek your own independent legal or financial advice before proceeding with any investment decision. This information has been prepared without taking account of your objectives, financial Unless otherwise indicated, there are no planned updates to this Investment Recommendation situation or needs. This material may contain material provided by third parties. While such material at the time of publication. Westpac has no obligation to update, modify or amend this Investment is published with the necessary permission none of Westpac or its related entities accepts any Recommendation or to notify the recipients of this Investment Recommendation should any responsibility for the accuracy or completeness of any such material. Although we have made every information, including opinion, forecast or estimate set out in this Investment Recommendation effort to ensure the information is free from error, none of Westpac or its related entities warrants the change or subsequently become inaccurate. accuracy, adequacy or completeness of the information, or otherwise endorses it in any way. Except where contrary to law, Westpac and its related entities intend by this notice to exclude liability for the Westpac will from time to time dispose of and acquire financial instruments of companies covered in information. The information is subject to change without notice and none of Westpac or its related this Investment Recommendation as principal and act as a market maker or liquidity provider in such entities is under any obligation to update the information or correct any inaccuracy which may become financial instruments. apparent at a later date. The information contained in this material does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or Westpac does not have any proprietary positions in equity shares of issuers that are the subject of an to enter a legally binding contract. Past performance is not a reliable indicator of future performance. investment recommendation. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks Westpac may have provided investment banking services to the issuer in the course of the past 12 and uncertainties. The ultimate outcomes may differ substantially from these forecasts. months. Country disclosures Westpac does not permit any issuer to see or comment on any investment recommendation prior to Australia: Westpac holds an Australian Financial Services Licence (No. 233714). This material is its completion and distribution. provided to you solely for your own use and in your capacity as a wholesale client of Westpac. Individuals who produce investment recommendations are not permitted to undertake any New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products transactions in any financial instruments or derivatives in relation to the issuers covered by the and services are provided by either Westpac or Westpac New Zealand Limited (“WNZL”). Any product investment recommendations they produce. or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the Westpac has implemented policies and procedures, which are designed to ensure conflicts of performance of WNZL in respect of any such product. The current disclosure statements for the interests are managed consistently and appropriately, and to treat clients fairly. New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac. co.nz. For further information please refer to the Product Disclosure Statement (available from your The following arrangements have been adopted for the avoidance and prevention of conflicts in interests associated with the provision of investment recommendations. Relationship Manager) for any product for which a Product Disclosure Statement is required, or applicable customer agreement. (i) Chinese Wall/Cell arrangements; China, Hong Kong, Singapore and India: This material has been prepared and issued for distribution (ii) physical separation of various Business/Support Units; in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients in Singapore of this material should (iii) and well defined wall/cell crossing procedures; contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision (iv) a “need to know” policy; by the Monetary Authority of Singapore. Westpac Hong Kong Branch holds a banking license and is subject to supervision by the Hong Kong Monetary Authority. Westpac Hong Kong branch also (v) documented and well defined procedures for dealing with conflicts of interest; holds a license issued by the Hong Kong Securities and Futures Commission (SFC) for Type 1 and Type 4 regulated activities. This material is intended only to “professional investors” as defined in (vi) steps by Compliance to ensure that the Chinese Wall/Cell arrangements remain effective and the Securities and Futures Ordinance and any rules made under that Ordinance. Westpac Shanghai that such arrangements are adequately monitored. and Beijing Branches hold banking licenses and are subject to supervision by the China Banking and Insurance Regulatory Commission (CBIRC). Westpac Mumbai Branch holds a banking license from U.S: Westpac operates in the United States of America as a federally licensed branch, regulated by Reserve Bank of India (RBI) and subject to regulation and supervision by the RBI. the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, UK: The contents of this communication, which have been prepared by and are the sole responsibility a Futures Commission Merchant registered with the US CFTC. Westpac Capital Markets, LLC (‘WCM’), of Westpac Banking Corporation London and Westpac Europe Limited. Westpac (a) has its principal a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities place of business in the United Kingdom at Camomile Court, 23 Camomile Street, London EC3A 7LL, Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority and is registered at Cardiff in the UK (as Branch No. BR00106), and (b) authorised and regulated by the (‘FINRA’). This communication is provided for distribution to U.S. institutional investors in reliance on Australian Prudential Regulation Authority in Australia. Westpac is authorised in the United Kingdom the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to by the Prudential Regulation Authority. Westpac is subject to regulation by the Financial Conduct all of the independence and disclosure standards applicable to debt research reports prepared for Authority and limited regulation by the Prudential Regulation Authority. Details about the extent retail investors in the United States. WCM is the U.S. distributor of this communication and accepts of our regulation by the Prudential Regulation Authority are available from us on request. Westpac responsibility for the contents of this communication. All disclaimers set out with respect to Westpac Europe Limited is a company registered in England (number 05660023) and is authorised by the apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential please contact WCM on +1 212 389 1269. All disclaimers set out with respect to Westpac apply equally Regulation Authority. to WCM. This communication is being made only to and is directed at (a) persons who have professional Investing in any non-U.S. securities or related financial instruments mentioned in this communication experience in matters relating to investments who fall within Article 19(5) of the Financial Services and may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (b) high net worth entities, and to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related other persons to whom it may otherwise lawfully be communicated, falling within Article 49(2)(a) to (d) financial instruments may be limited. Non-U.S. companies may not subject to audit and reporting of the Order (all such persons together being referred to as “relevant persons”). Any person who is not standards and regulatory requirements comparable to those in effect in the United States. The value a relevant person should not act or rely on this communication or any of its contents. The investments of any investment or income from any securities or related derivative instruments denominated in to which this communication relates are only available to and any invitation, offer or agreement to a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive subscribe, purchase or otherwise acquire such investments will be engaged in only with, relevant or adverse effect on the value of or income from such securities or related derivative instruments. persons. Any person who is not a relevant person should not act or rely upon this communication or any of its contents. In the same way, the information contained in this communication is intended for The author of this communication is employed by Westpac and is not registered or qualified as a “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct research analyst, representative, or associated person under the rules of FINRA, any other U.S. self- Authority and is not intended for “retail clients”. With this in mind, Westpac expressly prohibits regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically you from passing on the information in this communication to any third party. In particular this stated, the views expressed herein are solely those of the author and may differ from the information, communication and, in each case, any copies thereof may not be taken, transmitted or distributed, views or analysis expressed by Westpac and/or its affiliates.
You can also read