31 Aug 2009

Worst effects of recession over, Bollard believes

3:24 pm on 31 August 2009

The world's central bankers believe the worst of the global economic downturn is over, according to New Zealand's Reserve Bank Governor Alan Bollard.

Dr Bollard said the mood at a symposium of central bankers in the United States was that the worst effects of the recession are over and major financial institutions have steadied their ships.

While a recovery is beginning, the consensus at the meeting at Jackson Hole in Wyoming was that it will be slow and fragile, and a strong, resilient financial system must be built to ward against further fallout in world financial markets.

Dr Bollard told Nine to Noon that America's economic recovery is absolutely crucial in allowing other countries to pull out of recession.

He warned the era of easy credit that led to soaring house prices before the crisis appears to be over.

That credit came from the savings of people in East Asia, he says, and those savings are now being spent to boost demand in their own countries.

Cold comfort to regions

The bankers' assessment pf a tentative recovery is proving cold comfort to some regions still struggling to cope with rising unemployment.

Rotorua mayor Kevin Winters says when the dairy industry slumps, the tourism sector or forestry usually boosts the Rotorua economy, but this time they've all been hit.

On the positive side are the $43 million Te Arawa settlement on Friday and a new Air New Zealand direct flight from Rotorua to Sydney.

The Taranaki region has been buffered to some extent by the energy sector, New Plymouth mayor Peter Tennant says, and there's a feeling that things are "on the up and up".

Hastings mayor Lawrence Yule says the region's food-producing economy has sheltered it from the worst of the recession, but, as everywhere, job losses are continuing.

The Council of Trade Unions says manufacturers and exporters do not share the view that the worst of the economic downturn is over.