Growth to pick up from 2016 as economy diversifies, says NZIER - Quarterly Predictions, December 2015

25 November 2015

New Zealand Institute of Economic Research (Inc)
Media release 24 November 2015

EMBARGOED until 1am, Wednesday 25 November 2015
NZIER Quarterly Predictions, December 2015

Beyond the slowing from reduced dairy income, other sectors of the New Zealand economy, such as tourism, are picking up. This will see annual economic growth recover over 2016 towards 3%.

Diversification is happening across products and regions. Although China remains a very important market for our export sector, the recent conclusion of the Trans-Pacific Partnership agreement (TPP) opens up opportunities to other key markets such as the US, Japan and Canada.

Strong population growth from the continued surge in net migration will boost activity across many sectors, as well as demand for housing. While there has been some volatility in housing market activity in recent months as buyers rushed to purchase before the new rules from the Government and the Reserve Bank took effect, prices in key regions such as Auckland remain well above levels seen at the beginning of the year.

An independent take on the New Zealand economic outlook is available exclusively to NZIER’s members in the latest Quarterly Predictions.

Global risks continue to loom

There is still much uncertainty over China’s growth outlook. However, the demographics and changing composition of growth in China remains positive for New Zealand export demand. Further robust growth in the US economy is also a positive development.

The recent terrorism attacks have caused jitters in the markets, and present a risk to the global economy. While it may discourage tourism activity globally, New Zealand is generally viewed as a safe haven to visit and live in.

The Reserve Bank will cut again

In contrast to rising asset prices, generalised consumer price inflation remains low. Annual inflation at 0.4% remains well below the Reserve Bank’s 2% mid-point target.

The Reserve Bank is continuing to balance downside economic risks against the possibility of further surges in asset prices and the consequences of a sharp correction down the track. We expect one further OCR cut in December from the Reserve Bank to take it back to its record low of 2.5%.

For further information please contact:
Christina Leung, Senior Economist & Head of Membership Services

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