Weekly market wrap up - 7 March 2025
The New Zealand dollar, as we know it, hit the big 4-0 this week. The Kiwi dollar shed its fixed-rate shackles (being previously pegged to a basket of trading partner currencies) to embrace a floating rate in March 1985. The floating of the currency was a significant moment for an economy that was, at that time, still maturing. For the wider New Zealand market, this change had profound effects. It enhanced the ability of the Reserve Bank of New Zealand to control inflation through interest rate adjustments, as monetary policy could be more responsive to domestic economic conditions. Exporters and importers had to adapt to exchange rate volatility, which introduced both opportunities and risks. A floating currency also supported increased foreign investment, as investors tend to view open and competitive markets more favourably.
While managing the risks associated with a floating exchange rate is not always sunshine and rainbows, it is now a key component of our economy. Here’s to another 40.
Japan's job market is showing its mettle, with the unemployment rate nudging up to 2.5% in January 2025 - just a smidge over December's 2.4%. The labour force expanded to 70 million, even as 110k individuals decided to temporarily unplug from the daily grind. The jobs-to-applications ratio also climbed to a nine-month high of 1.26, outpacing the anticipated 1.25. For the past three years, the average unemployment rate has floated below 2.6%, confirming that Japan's labour market remains snug.
While these numbers are enlightening, they also mask the myriad human stories they represent - each statistic is a reminder of ambitions, challenges, and the little victories we often overlook in the quest for gainful employment.
President Trump has pulled the metaphorical trigger on tariffs this week, kick-starting a potential trade war (or at least a potential trade kerfuffle) with the neighbours to the north and south of the US. Imports into the US from Canada and Mexico are now subject to a 25% tax, with a mild reprieve for Canadian energy which is hit with only a 10% tax. Highlighting how dynamic the situation is, the US announced a pause on tariffs for many Mexican products this morning, while Canada, for now, continues to face the full brunt. China, which is facing a gentler nudge at 10%, has been the quickest to retaliate, striking back with its own tariffs as quickly as the US announced theirs. Earlier this week, Canada and Mexico also signalled their intent, at a national level, to retaliate similarly if tariffs aren’t renounced. At a Canadian Province level, retaliation is already underway. From a New Zealand perspective, the US is a significant export market, and murky tariff waters could definitely cause ripples across the Pacific Ocean.
Those ripples could continue until trade actions ease, or the world adjusts to the new ‘normal’.
Only weeks after the Reserve Bank of Australia (RBA) cautiously trimmed its cash rate, the Australian economy was delivered another shot of good news - an uptick in GDP growth. The December quarter saw the pace of economic expansion in the lucky country double from the quarter prior, landing at 0.6%. That rate of quarter-on-quarter growth, marks the fastest pace seen since 2022. Year-on-year growth also turned a positive corner, climbing to 1.3% from the previous period's 0.8%. While the increased pace is certainly a positive, growth stability is the key moving forward. Too much growth, too soon, can be inflationary.
Still, with interest rates inching lower and GDP climbing higher, the Australian economy appears to be reasonably well placed to adapt to rapidly evolving global economic conditions.
Authors: Ben Bridgman, Zoe McCane, Sam Duncan and Duncan Roff
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