While there has been some narrowing in the current-account deficit in the fourth quarter of 2014, it is unclear to what extent this represents the beginning of a sustained compression of the current account after a long period of real exchange-rate depreciation. Furthermore, a stronger US dollar tends to dampen commodity prices, with adverse implications for commodity producers like South Africa.
Further changes are being consulted on in the documents just released by Treasury. The Governor is scheduled to talk on 11 July about the government’s review and what that means for the future of the Reserve Bank and the prosperity and wellbeing of New Zealanders.