Infometrics’ latest forecasts show the New Zealand economy still has more gas in the tank for 2018, despite the slowdown of the last 12 months and suggestions from some analysts that all the economy’s key drivers have already peaked. Infometrics’ Chief Forecaster Gareth Kiernan points to a buoyant export sector, increased government spending, and the perennial need to build more houses in Auckland as the key components of GDP growth averaging 3.4%pa during 2018 and 2019.
The New Zealand economy has entered 2017 in good spirits, with Infometrics’ latest forecast predicting GDP growth over the three years to June 2019 will average more than 3.0%pa. However, Infometrics Chief Forecaster Gareth Kiernan believes the solid outlook for growth masks several risks that hang over the economy.
With the recent Brexit vote creating waves around the world, it is likely that Michael Gove, one of the leaders of the Leave campaign, is rethinking his comments before the vote. He was asked why he should be trusted over the overwhelming list of economists and international authorities who opposed Brexit, to which he retorted “People in this country have had enough of experts.”
New analysis by economic consultants Infometrics shows the supply response to the housing crisis is on its way, with homebuilding consents forecast to hit record levels by 2018. Infometrics Chief Forecaster Gareth Kiernan has predicted a 39% increase in the number of new dwelling consents over the two years to June 2018, taking consents to an all-time record high of 40,044pa.
Fears that we’d have to lower flags to half-mast to mourn the demise of the domestic economy during 2016 now seem to be ill-founded. Confidence levels have improved over the last six months, and indicators of the labour market and household spending have been fluttering in the wind. Tourists and immigrants have been flocking to our shores and boosting activity – once they’ve realised that our four-star offering is superior to Australia’s six-star version.
Heading into 2016, the Chinese economy is dominating our thinking as we try and work out how much more of a slowdown will occur this year. Less buoyant growth in China potentially has flow-on effects for monetary conditions both here and overseas, and may also influence the rate at which international dairy prices improve this year. And while the Reserve Bank may look like its latest loan-to-value restrictions have helped it get on top of the Auckland housing market, we are sceptical about how long that feeling of control will last.