December 28, 2018

New Zealand Institute of Economic Research (Inc)
Media release 27 November 2018

EMBARGOED until 1am, Wednesday 28 November 2018
NZIER Quarterly Predictions, December 2018

NZIER sees mixed growth outlook

Slowing population growth is driving a moderation in economic growth, but several positive factors continue to support demand, as detailed in the latest NZIER Quarterly Predictions. “We have reduced our growth outlook, and now expect annual GDP growth to average around 2.8 percent over the next five years.”

“While that represents a respectable outcome for the New Zealand economy, there are downside risks to the outlook”, said Principal Economist Christina Leung.

Downside risks both here and abroad

Here in New Zealand, business confidence continues to deteriorate, and businesses are also reporting some softening in demand in their own business. Weaker profitability is also reducing firms’ appetite to invest.

Meanwhile, there are also downside risks offshore from increasing trade tensions between the US and China, uncertainty over how Brexit will play out and market adjustment to higher global interest rates.

Fuel prices drive higher inflation

Higher fuel prices have boosted headline inflation in New Zealand over the past year. Although the more recent fall in fuel prices will likely see an easing in headline CPI for the December quarter, beyond that we expect inflation to trend higher over 2019.

We continue to expect the OCR to be kept on hold until March 2020

“Interest rates are lifting globally, led by the US Federal Reserve. Although the Reserve Bank continued to highlight the potential for the OCR to move lower should growth not pick up as much as it forecasts, we still expect the next move in interest rates to be up.

However, the Reserve Bank will be cautious about lifting interest rates too soon, and we continue to expect it will keep the OCR on hold until the first half of 2020. ”

An independent take on the New Zealand economic outlook is available exclusively to NZIER’s members in the latest Quarterly Predictions.

For further information, please contact:
Christina Leung, Principal Economist & Head of Membership Services, 021 992 985