NZ economy: Finding the sweet spot - Westpac

Analysts at Westpac expect New Zealand’s annual GDP growth to top 3% over the next couple of years, as a wave of building work progresses and higher dairy prices provide some relief to rural regions.

Key Quotes

“Population has boosted activity, and is likely to continue to do so as long as job prospects remain favourable here. Higher interest rates are likely to take the edge off house prices and consumer spending.”

“The New Zealand economy finished 2016 on a high note. We estimate that GDP growth reached 3.3% for the year, with standout contributions from building activity, consumer spending and business services. That would be the fastest pace of growth we’ve seen yet during this upturn – though that’s partly because recent revisions to the GDP figures have shaved back the pace of growth over the last few years.”

“The country is now entering its seventh year of sustained growth. The damage wrought by the Global Financial Crisis is becoming more distant, and activity has now returned to around its non-inflationary potential. We wouldn’t normally expect to see growth accelerating at this late stage of the economic cycle. But there is another atypical aspect of the current cycle: a record surge in net migration has lifted the population growth rate to above 2%, which is unusually high by the standards of a Western economy. In per capita terms, the pace of GDP growth has been more modest in recent years.”