Confidence remains that the New Zealand economy can weather the Delta outbreak and bounce back strongly again from lockdown, according to Infometrics’ latest economic forecasts. Infometrics predicts that household spending will once again be in “catch up” mode when alert level restrictions are eventually eased. Business confidence also shows that, overall, firms remain optimistic about a return to normal.
In the past 12 months clients have increasingly been asking us for real time data. This is understandable.
Rob Heyes looks at the ways that real time data is used in economic analysis and the trade-offs that need to be considered when using real time data.
The Reserve Bank’s August 2021 Monetary Policy Statement made it clear that interest rates will continue to be pushed higher. Demand conditions across the New Zealand economy are strong, but supply issues are creating heightened labour market and inflationary pressures.
Inflation has picked up rapidly and is set to spike higher in coming months, and the Reserve Bank has confirmed a strong tightening bias in its monetary policy settings. As a result, we have changed our outlook for monetary policy. We are now picking an increase in the official cash rate (OCR) next month, and we see potential for a rise of 50 basis points.
The New Zealand economy is growing at an unsustainable rate, fuelled by the massive fiscal and monetary stimulus applied over the last 16 months in response to the COVID-19 pandemic. Infometrics’ latest forecasts predict that economic growth will climb to over 5%pa this year, with growth in household spending reaching 10%pa. These strong demand conditions are being accompanied by a wide range of cost pressures that are creating serious inflationary risks, with the burst of demand unlikely to hold up.
This time last year, the government closed the borders and then sent New Zealand into a lockdown that saw life virtually come to a halt. Amid this disruption, economists rapidly slashed their forecasts for GDP and employment. But economic activity has bounced back from lockdown largely unscathed, and the unemployment rate has only lifted from 4.2% to 4.9%. Why did forecasters get it so wrong?
The roll-out of vaccines both in New Zealand and around the world is providing light at the end of the COVID-19 tunnel, but the coming year will still be a challenging one for the New Zealand economy, according to Infometrics’ latest forecasts.
Infometrics is very proud to see Senior Economist and Director Brad Olsen named as 2020 Young Wellingtonian of the Year.
Gareth Kiernan starts the year by looking at what we can expect of the New Zealand economy, and life in general, in 2021.
Despite rebounding well from the initial lockdown and effects of the COVID-19 pandemic so far, the New Zealand economy remains vulnerable, according to the latest projections from Infometrics. The company is forecasting a double-dip recession to hit during 2021, as delayed job losses punch a hole in consumer spending and drag economic activity lower.