The continued decline in interest rates has supported confidence in the New Zealand economy. In particular, firms are feeling optimistic about an improvement in general economic conditions and demand in their own business ahead. This is despite the fact that lower interest rates have yet to translate into a meaningful recovery in activity.
Households are feeling cautiously optimistic. Although lower interest rates have reduced mortgage repayments for some borrowers, with further reductions expected this year, the weaker labour market is weighing on the recovery in consumer confidence. Nonetheless, we are beginning to see a pick-up in retail spending, which we expect will continue over the coming year as many households face further reductions in mortgage repayments as they reprice onto lower mortgage rates. .
Quarterly Predictions is an independent review of New Zealand’s economic outlook and includes comprehensive forecasts of the economy. The full publication is available exclusively to NZIER’s members.