NZIER says growth outlook slightly softer as population growth slows - Quarterly Predictions, December 2017

New Zealand Institute of Economic Research (Inc)
Media release 29 November 2017
Embargoed until 1am, Wednesday 29 November 2017
NZIER Quarterly Predictions, December 2017

There is much uncertainty over the effects of the new Government’s policies. Nonetheless, the New Zealand growth outlook remains positive, as detailed in the latest NZIER Quarterly Predictions.

“More expansionary fiscal policy will provide stimulus to the economy, but growth will moderate as population growth slows in the next few years”, said Principal Economist Christina Leung.

Net migration turns, effects will be felt beyond 2019

“Net migration has been very strong in recent years, but looks to have turned. Given the lagged effects of strong population growth, we expect demand to remain supported for the next year. Beyond that, the easing in net migration will accelerate and demand will soften in areas such as retail spending and construction.

We expect a softer economic outlook, with annual GDP growth averaging below 3 percent over the next five years. We expect GDP growth per capita to lift to around 1.3 percent on average over the next few years”, Leung said.

Faster pick-up in inflation

“Inflation and inflation expectations have picked up. The combination of increased fiscal stimulus from the Government and more acute capacity pressures is likely to see a slightly faster pick-up in inflation. Lower net migration will reduce the extent to which labour supply can expand to meet demand, with wage growth likely to pick up as a result”, said Leung.

No urgency for the Reserve Bank to lift interest rates

“However, inflation remains contained for now, and the continued easing in housing market activity and uncertainty over the global outlook means there remains little urgency for the Reserve Bank to start lifting the OCR. We continue to expect the Reserve Bank to leave the OCR on hold until November 2018.”

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

For further information, please contact:
Christina Leung, Principal Economist & Head of Membership Services
christina.leung@nzier.org.nz, 021 992 985