Inside this report:

International overview

The longest run of global growth in excess of 4% pa since the years 1968-73 seems set to continue.  The world economy is expected to expand by about 4½% this year and next, with developing countries playing an increasingly important role.

Australian outlook

A moderation in inflationary pressures and sub-trend growth in the non-farm sector opens the door for rate cuts by year end.

New Zealand outlook

The New Zealand economy has achieved the fabled soft landing.  We expect interest rates to remain on hold for 2007 and most of 2008, with the easing cycle likely to start in December 2008.

Financial market update

Global liquidity conditions will remain buoyant over the year ahead and asset markets will continue to generate strong returns.  We expect the A$ to depreciate to US$0.73 by the end of 2007.

Feature article

Carbon trading is part of a suite of measures aimed at combating global climate change.  Australia has not yet officially joined any international carbon trading schemes or implemented its own regime, but we are moving ever closer to doings so.

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