November 27, 2019

New Zealand Institute of Economic Research (Inc)
Media Release, 26 November 2019
Embargoed until 1am, Wednesday 27 November 2019
NZIER Quarterly Predictions, December 2019

NZIER sees weaker growth outlook as uncertainty weighs on demand…

Growth is expected to slow further over the coming years as uncertainty here and abroad make businesses and households more cautious about spending, as detailed in the latest NZIER Quarterly Predictions. “We now expect annual GDP growth to average just over 2 percent over the next five years. Businesses report softening demand, and persistently weak profitability is leading to increased caution about investment”, said Principal Economist Christina Leung.

…coming off the longest stretch of growth on record

While growth is slowing, the outlook remains positive. The New Zealand economy is currently in its longest stretch of growth on record since 1947, having gone through 34 consecutive quarters of growth. Although the unemployment rate has picked up from its 11-year low, households are feeling more positive about their own financial situation relative to a year ago.

Lower mortgage rates have also supported renewed interest in housing. House sales lifted across the regions, with house price increases recorded in recent months particularly in North Island regions including Northland, Waikato and Wellington. We expect low mortgage rates and solid population growth will continue to support housing demand, which in turn should encourage residential construction over the coming years.

Global growth softer, but still reasonable

Growth in our major trading partners is slowing, but the outlook is reasonable. With international consensus forecasts pointing to annual growth in our main trading partners at just over 3 percent over the coming years, we expect global growth will underpin further growth in demand for our exports.
This edition of Quarterly Predictions includes a special feature on the potential effects of US tariff hikes for New Zealand.

RBNZ surprises by keeping OCR on hold

The Reserve Bank again surprised markets in its November meeting, this time by leaving the OCR on hold after the surprise 50 basis point cut in August. We do not see economic conditions as warranting the need for further monetary policy stimulus, particularly given the risks of distortions to the financial system. We expect the OCR to be kept on hold for an extended period, before rising gradually from the end of 2021.

Quarterly Predictions is an independent review of New Zealand’s economic outlook and includes comprehensive forecasts of the economy. The full publication is available exclusively to NZIER’s members.

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