More subdued growth, due to persistent spare capacity in the global economy following the global financial crisis, has been a key feature of the current New Zealand business cycle.
This is a key take-out from a review of the current business cycle, published today in the Reserve Bank Bulletin.
The article summarises developments in the New Zealand economy since 2008 through the lens of monetary policy.
The article identifies five key phases: the global financial crisis of 2008-09; ‘green shoots’ recovery (mid-2009 to mid-2010); domestic caution and global uncertainty (mid-2010 to late 2012); commodity boom and construction upswing (early 2013 to mid-2014); and persistently low inflation (mid-2014 to present day).
Despite extremely accommodative monetary policy settings, growth in major advanced economies has proved to be slower than in past expansions. Growth in New Zealand has also been more subdued than in past business cycles, in large part due to weakness and uncertainty abroad. Against this international and domestic backdrop, consumer price inflation in New Zealand has been low.
A follow-up Bulletin article — due to be released in the coming weeks — will present some of the key features of the business cycle and the insights for monetary policy that have emerged or been reinforced.
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