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Major Global Developments in the New Millennium

1 PPP measures of GDP equalise purchasing power of different currencies by eliminating the differences in price levels between countries. As price levels in developing countries are much lower PPP estimates of GDP are higher relative to OECD countries. Revised nominal GDP estimates place the Chinese economy as the world's 6th largest in 2004 (around $2bn USD), after the US, Japan, Germany, UK, and France.

2 For example, World Bank (2002) estimates suggest that global incomes would rise by $2.8tn USD over a decade if trade was liberalised. More than half of this would accrue to developing countries.

3 China joined the WTO in 2001. India has been a WTO member since 1995. More progress has been made in some sectors than others. Further efforts to reduce global barriers to trade in agriculture and services are underway in the current WTO Doha round.

4 ASEAN consists of 10 countries: Singapore, Malaysia, Indonesia, Thailand, Vietnam, Philippines, Brunei, Laos, Cambodia and Myanmar. Negotiations are expected to be concluded in 2007.

5 According to OECD estimates, China overtook the United States in 2004 to become the world's largest exporter of ICT.

6 See early studies by Julius (1999) and Solow (2001)

7 For example, World Bank (2002) estimates suggest that global incomes would rise by USD$2.8trillion over a decade if trade was liberalised. More than half of this increase would accrue to developing countries.

8 China is now New Zealand's 4th largest merchandise trading partner behind Australia, the US and Japan.

9 See "A foreign affair", Economist print edition, October 2005.

10 A `global glut' of foreign savings may also have had an influence.

11 See Munro et al (2005).

12 Increases in housing turnover tend to precede increases in household debt. This could reflect life cycle factors: older households with little or no mortgage debt sell houses to first time households, who incur high levels of mortgage debt.

13 In New Zealand household debt to income it is approaching 150 per cent, whereas it was around 80 per cent at the start of 1995.

14 Approximately 10 per cent of New Zealand home owners with mortgages face housing costs higher than 50 per cent of their equivilised household disposable incomes. see RBNZ (2005).

15 See Bollard (2004a).

16 Rising transaction costs from more stringent security measures and fewer tourists are estimated to account for more than 90 per cent of the total costs. We note there is no global consensus on what terrorism means. The APEC study does not propose a precise definition of terrorism but describes it as occupying a space along the continuum between civil disobedience and armed insurrection.

17 See studies by the Asian Development Bank (2005) and Congressional Budget Office (2005) for illustrative impacts on the Asian and US economies. A New Zealand Treasury (2005) report provides a preliminary assessment of the potential impact of a severe pandemic in New Zealand.

18 The earth's average temperature has increased by about 0.6 degrees Celsius over the past 100 years, whereas sea levels have risen by 10-20 cm. The 20th century's 10 warmest years all occurred in the last 15 years of the century.

19 IEA projections suggest CO2 emissions will be approximately 50 per cent higher than today by 2030.

20 Despite these shocks being fairly recent, financial market measures of volatility and risk aversion are currently around historically low levels.

21 The risk of a `super-spike' in oil prices to over USD$100 per barrel was raised by some investment banks in early 2005, among them Goldman Sachs. At the time of Hurricane Katrina oil prices did spike above USD $70pb but have since settled back.

22 Alan Greenspan (2005b) notes that much of the world's proven resources are concentrated in politically volatile areas.

23 In the December 2005 Half Year Economic and Fiscal Update an additional $13m was allocated over the forecast period towards the unquantified fiscal risk of preparing for a Possible Pandemic in New Zealand. see

24 To illustrate of the potential losses from a foot and mouth outbreak in New Zealand, the Reserve Bank and Treasury published a hypothetical scenario; potential losses under this scenario cumulated to slightly under 10 per cent of GDP after 2 years s. See RBNZ (2003).

25 The Reserve Bank regularly assesses the soundness and efficiency of the financial system, the details of which are published in the 6-monthly Financial Stability Report. See