International Economics: IB Economics

In New Zealand food price inflation has reached its highest for 13 years, with vegetable and dairy price rising driving this, and a commensurate rise in grocery costs, and, ultimately, inflation.

In short, we are experiencing a global cost of living crisis.

Crack out the bunting - another fabulous free trade deal with a small nation 12,000 miles away has been signed to replace the one with the world's largest economic bloc on our doorstep. Supporters say that it's likely to boost bilateral trade by 60%, farmers fear that they will be undercut by the Kiwi competitors- and there's a fascinating story there about why the removal of agricultural support in the 1980s made them more competitive.

Critics, however, suggest that in 2019 New Zealand accounted for 0.25% of our exports and 0.15% of our imports. So a 60% increase in bilateral trade is worth well, around £600m - effectively nothing in trade terms. 

And elsewhere things are slowly returning to 'normal' with New Zealand's central bank raising interest rates by 0.25% to 0.5%.

It seems odd to be suggesting that an interest rate of 0.5% is 'normal' - and you might argue whether or not this change is going to have much impact on the real economy.

It seems that the US isn't the only country with national security concerns dictating its trade policy: New Zealand has chosen to block the use of Huawei's telecoms equipment in its domestic telephone network. The Head of New Zealand's security services has suggested that this could compromise national security and a new provider of equipment for the 5G network is being sought.   

This story shows how consumers always sniff out bargains - in this case, to avoid high inflation and a lack of choice in New Zealand stores, Kiwi shoppers are bulk ordering groceries from Australian supermarkets to make savings on their shop.  

It's been an interesting week for monetary policy across the world - Turkey is looking to tackle rising inflation by lowering interest rates, but South Korea and New Zealand are adopting the more orthodox strategy of raising then with inflation predicted to go above target and pose a threat to the post-pandemic recovery.

Which is the right strategy? Only time will tell. Or rather - I think we already know - but you might still query whether raising interest rates is appropriate if you're dealing with cost-push inflation. 

Another recession: this time in New Zealand, the first for 11 years and the worst since current records began, although the Finance Minister suggested that things were better than expected. Small crumbs of comfort, perhaps.

The Guardian wins the prize for the "Thinly Concealed Glee" award today. I'm equally taken with the notion that an ex-GP, Liam Fox MP,  is helping negotiate trade deals. I must see an economist about my forthcoming health check.