NZ: Decent growth for now but moderation ahead – Westpac

The NZ economy is now into its seventh year of expansion, and analysts at Westpac expect that economic growth will remain firm (around 3%) over the coming year, but slow thereafter.

Key Quotes

“Activity has long been supported by strong population growth, increases in construction spending, and accommodative monetary policy. On top of those factors, we’re now also seeing firmer conditions in exports sectors, and fiscal policy is set to adopt a more stimulatory stance.”

“However, on a per capita basis, economic growth has actually been quite modest.”

“In addition, much of the increase in domestic demand in recent years has come on the back of rising household debt, which is not a sustainable source of growth.”

“Borrowing rates which have been creeping higher, tightening in lending conditions, and uncertainty ahead of September’s election, have contributed to the housing market slowing (from 15% growth to near zero).”

“House sales fell 25% over the past year, and the number of unsold homes has been creeping higher. This suggests that there is more housing market weakness to come.”

“We expect that house prices will be flat over 2017 as a whole, and that we’ll see only muted rises over the next few years, weighing on household spending and the wider economy.”

“There’s much uncertainty regarding government policy given the 23 Sep election. A change of government could have significant implications for our economic forecasts.”