NZ Economy Progressing

New Zealand’s economic expansion has entered a more ‘mature’ phase. While gross domestic product growth isn’t weak, it has slowed from the rates of 3.5% to 4% p.a. that was seen in recent years as earlier drivers of demand have cooled, a report said.

“We expect a further moderation over the next few years,” the Australia & New Zealand Bank report said, FXStreet reported.

Among the more notable developments has been the slowing in migration-led population growth. While net migration remains elevated, it has actually been easing back for around a year now. In fact, the net inflow of 67,000 people in the year to April was the lowest it’s been in two years, ANZ said.

“We expect that net migration will continue to slow as many of those who arrived in recent years on temporary visas depart,” it said.

“At the same time, the heat has come out of the housing market. After a brief resurgence, house prices have started to fall again in Auckland and Christchurch, and the pace of increase has slowed sharply in Wellington. With a range of significant government policy changes targeting the housing market being introduced (such as the extension of the ‘bright line’ test for taxing capital gains which came into effect at the end of March), we expect house prices will lose further ground over the remainder of this year.”

The slowdown in the housing market will dampen households’ spending appetite. “In fact, we’ve already seen softness in the retail sector in the early part of 2018: core retail spending only rose by 0.6% in the March quarter, and electronic card transactions for April point to a soft path for spending.”