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13 Mar 2015
New Zealand vulnerable to Australian slowdown - Capital Economics
FXStreet (Bali) - Paul Dales, Chief Australia & New Zealand Economist at Capital Economics, notes that New Zealand is vulnerable to Australian slowdown.
Key Quotes
"The hit to New Zealand’s exports from the economic slowdown in Australia is going to be felt at almost the exact same time as the boost to activity from the domestic construction boom starts to fade. These two factors will contribute to an easing in GDP growth in New Zealand from around 3.0% last year to about 2.3% this year and to 2.0% next year."
"We estimate that the slowdown in economic growth in Australia will reduce GDP in New Zealand by around 0.5% both this year and next. Meanwhile, the contribution of construction investment to annual New Zealand GDP growth is on course to decline from 1.0 percentage point (ppt) last year to 0.5ppts in 2016. This weaker economic climate will bring interest rate cuts in New Zealand back onto the agenda later this year. (See pages 2-3.)."
"The softer outlook for activity in New Zealand means that we won’t be putting much weight on what we estimate was a strong 0.9% q/q rise in GDP in the fourth quarter (data due on Friday). Meanwhile, we expect that the release of the minutes of the March Reserve Bank of Australia policy meeting on Tuesday will confirm that the RBA is happy in principle to reduce interest rates further, but that it thought back-to-back cuts would add too much fuel to the fire in the housing market."
Key Quotes
"The hit to New Zealand’s exports from the economic slowdown in Australia is going to be felt at almost the exact same time as the boost to activity from the domestic construction boom starts to fade. These two factors will contribute to an easing in GDP growth in New Zealand from around 3.0% last year to about 2.3% this year and to 2.0% next year."
"We estimate that the slowdown in economic growth in Australia will reduce GDP in New Zealand by around 0.5% both this year and next. Meanwhile, the contribution of construction investment to annual New Zealand GDP growth is on course to decline from 1.0 percentage point (ppt) last year to 0.5ppts in 2016. This weaker economic climate will bring interest rate cuts in New Zealand back onto the agenda later this year. (See pages 2-3.)."
"The softer outlook for activity in New Zealand means that we won’t be putting much weight on what we estimate was a strong 0.9% q/q rise in GDP in the fourth quarter (data due on Friday). Meanwhile, we expect that the release of the minutes of the March Reserve Bank of Australia policy meeting on Tuesday will confirm that the RBA is happy in principle to reduce interest rates further, but that it thought back-to-back cuts would add too much fuel to the fire in the housing market."