Economics of the NZD

The New Zealand Dollar's Presence Globally

The New Zealand Dollar, often know as the 'kiwi dollar' has been the official currency of New Zealand since 1967 when it replaced the New Zealand Pound. The Reserve Bank of New Zealand is completely government operated and owned, making it unique in the world of central banks; also making it more actively involved in currency trading in the forex markets than some other central banks. Various economic and political factors combine to drive the ever-changing value of the NZD, but key to traders are the many economic indicators pertinent to the New Zealand economy.

Some of the relevant economic indicators to the NZD are released directly through the Reserve Bank of New Zealand, while others may be released from private data analysis firms. Each of the economic indicators listed and described below have the potential to affect the price and stability of the NZD upon their release. There are other indicators that are directly relevant to the NZD, but that have been excluded from this list.

The economic indicators outlined below can potentially move the price of any currency pair the NZD is involved with. These currency pairs include:

Some of the below reports are commonly released by most economic powers around the globe, others are specific only to the New Zealand economy. The reports are listed in alphabetical order, for more on the report and its strength ranking take a look at each individual indicator description below. For the date and time of the next release for each report please browse our current economic calendar.

Reports Listed in Alphabetical Order

Interest Rate Statement

Perhaps at the core of all economic indicators are those that relate to interest rate decisions. In fact, most would argue that other economic indicators are used by the average trader as nothing more than a means to anticipate pending interest rate changes. Eight times per year New Zealand's central bank, the Reserve Bank of New Zealand (RBNZ) will release an Interest Rate Statement. The bulk of the statement includes an explanation of the various economic factors that influenced the change in rates (or lack thereof) for the nation's short term interest rate, also referred to as the "cash rate". The report will also include insight as to what the next interest rate decision might be. Short term interest rates are of monumental importance to traders in any of the major financial markets. This is due to the fact that high interest rates attract foreign investors who are seeking the highest possible return in exchange for the lowest possible risk. Central banks are most concerned with price stability. If inflation rates are continually rising interest rates will likely be increased in an effort to bring prices back down. Globally, increased interest rates are said to entice foreign investment flows, which would of course, in turn, increase the demand and the standing of a nation's currency on a global scale. Seasoned economists understand the relationship between inflation and interest rates, namely that inflation tends to precede higher interest rates, which ultimately increases the global demand for a nation's currency.

Trade Balance

Trade balance compares the amount of imported goods and services to the amount of exported goods and services of a given economy. Economically, it is in the best interest of an economy to have more goods and services exported than have been imported. Thus, a positive trade balance measures a period in which more goods and services were exported than were imported. An increased number of exports translate to an increase in the demand for said nation's currency, as other countries will be forced to exchange currency in order to purchase the exports. GDP (Gross Domestic Product) is also largely impacted by the trade balance, as an increase in the demand for exports will increase the work load of domestic factories, thus increasing employment levels.

Unemployment Rate

The Unemployment Rate, as one might presume, measures the total number of citizens that are unemployed and who are presently seeking employment. Because consumer spending is such a large part of economic health, and those who are employed tend to spend more than those who are not, a downtrend seen in this indicator will have a positive effect on a nation's overall economic strength. The Unemployment Report is considered by traders a lagging indicator, meaning that its insight offers little in the way of future projections. As such, this is indicator is not as heavily regarded as perhaps its name would suggest.

Retail Sales m/m

Retail Sales is a measurement of the total value of retail sales in a given period. Because a large portion of consumer spending is accounted for in this indicator and because this indicator is typically the first of the month to report numbers concerned with consumer spending, traders tend watch this indicator closely. Retail Sales gives traders a good look at the consumer spending situation, which of course, will account for approximately half of GDP (Gross Domestic Product). In other words, traders watch Retail Sales because of its lead into consumer spending, which, in turn, is important because of its lead into GDP. Rising trends seen within this indicator should positively affect the standing of a nation's currency.

PPI Input q/q

PPI stands for Producer Price Index, a fundamental indicator that establishes the rate of inflation, or in other words, the rate of price changes as seen by manufacturers who must purchase goods and services. As PPI relates to the NZD it is broken into two separate economic indicators; PPI Input (measure of goods and services bought) and PPI Output (measure of goods and services sold). Of the two, PPI Input is generally more closely watched by traders. The Producer Price Index is touted as a timely and detailed inflation indicator. Typically, it is assumed that a rising trend in PPI will positively impact a nation's currency. Logically enough, when manufacturers are forced to pay higher prices for the goods and services they need, these higher prices are then soon seen by the consumer. As such, the PPI is considered an indication of consumer inflation. The potential impact of PPI in the market is well respected by traders, though it is generally not thought to have as large of an impact as does its closely related cousin; Consumer Price Index (CPI), which is usually released shortly after PPI.

Visitors Arrivals m/m

This indicator is a simple measurement of the total number of foreign citizens arriving in the country in a given period (monthly). Tourism largely impacts the economy of a nation, as many nations' tourism related employment accounts for up to 10% of total employment; employment of course impacts consumer spending and ultimately Gross Domestic Product.