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Indicators Show NZ Economic Growth Robust

The economy could continue to expand in a 2.5% to 3% range.The economy could continue to expand in a 2.5% to 3% range.

The New Zealand economy is in an enviable state, Bank of New Zealand head of research Stephen Toplis said Monday. Growth was robust, employment prospects were good, the housing market was stable and global demand was supportive.

New Zealand had fiscal surpluses and interest rates were low. “From here, though, things get a bit more difficult and we expect economic growth to moderate despite significant fiscal stimulus,” RTTNews reported.

But, barring a major asset price corruption, induced by global monetary tightening, the prospects remained “relatively sound” for the medium-term, he said.

Global growth was firing on all cylinders. The consensus of expectations for the world for the next 12 months was sitting just below its highest level since 2011. Importantly, the growth was being shared widely, giving an air of sustainability many past cycles did not share, Toplis said.

New Zealand’s trading partner expansion appeared to be peaking and nervousness about the potential impact of monetary tightening was beginning to spread. “We remain cautiously optimistic but equally mindful a significant asset price correction could yet prove destabilizing.”

New Zealand gross domestic product economic growth had been moderating, he said. On an annual average basis, the expansion peaked at 4% in the fourth quarter of 2016. By September last year, the pace of expansion had slowed to 3%.

The economy could still continue to expand in a 2.5% to 3% range for the foreseeable future.

A significant driver of growth over the next two years would be the fiscal impulse as the government delivered a series of handouts to the household sector while pushing ahead with significant investment plans both in terms of housing and infrastructure, Toplis said.

The labor market was becoming increasingly tighter. By the end of last year, the unemployment rate had dropped to 4.5%, the lowest it had been since December 2008.

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