One is that when there are strong forces on the New Zealand economy, policy settings may need to lean quite hard against them. A second is that financial cycles can be surprisingly large and long-lasting. A third is that such forces in a small open economy can cause large exchange rate swings. Difficult judgements must be made about the balance across the trade-offs.
Issues in our current forecasts Our current forecasts also show the current challenges in predicting the balance of opposing economic forces, recognising the uncertainties, and accounting for trade-offs. The combination of the global financial crisis and the Canterbury earthquakes has left a legacy of tough economic issues to resolve.