It is too early to say what the full economic effect of the outbreak will be, and this situation will require careful monitoring. In summary, I remain optimistic about the outlook, but I am also highly aware that some notable risks still threaten growth, both overseas and at home. A few words on inflation.
Such adjustments are likely to be prompted by a lower exchange rate and/or higher interest rates. The transition to a lower current account deficit effectively means reducing New Zealand's reliance on foreign savings and increasing the saving we do ourselves. For the household sector, which has been relying heavily on debt in order to finance spending, this adjustment process may not be painless.