It seems our economy is not quite out of the woods yet. ASB Bank’s economics team is warning businesses despite NZ coming out of recession, there are still several things to be aware of as the upturn gathers pace.

The first key change is the global availability of credit will not be as easy as it was - but with greater competition for the funds available. NZ has large external borrowings which will increase as the Govt increases its debt levels, so will need to compete to borrow its share of the pie. Financial regulation will be tightened up in many countries. NZ will also see some of its own regulatory changes. One example is the RBNZ’s new bank liquidity policy.

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A second change is households in a number of countries are demonstrating a preference to pay for purchases with money they have rather than money they borrow. This trend is likely to continue for some time. NZ is included in this group, with spending and borrowing habits conservative at present.

A third is the fiscal legacy of recession in many other Western economies. Govts will be focusing for years to come on restraining spending and repaying debt, a contractionary force on a number of economies. Fiscal constraints will also be a handbrake for NZ, though less so than in a number of countries. Investors will need to be aware of all these changes to make the best returns in 2010.

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