How sustainable do we believe the improvement in New Zealand’s NFL position might be? Turning from the past to the future, where might New Zealand’s external position head from here? Our current medium-term forecast (from the May 2017 Monetary Policy Statement) has NFLGDP remaining at about its current level of just below 60 percent over the forecast horizon (to 2020).
Many assumptions about the domestic and global economy underlie this forecast; some of the most relevant are that:   the terms of trade continues its gradual upward trend;    exports of services continue to increase at the same rate as GDP;    the implied interest rate on our foreign debt increases only gradually, and remains below its pre-GFC peak;    annual household consumption growth moderates gradually over the medium term, and is outpaced by income growth (implying a slight improvement in the household saving rate); and,    nominal business investment remains low as a share of GDP.