The long-awaited recovery in the New Zealand economy is finally showing signs of gaining traction as demand conditions improve. Firms are reporting a pick-up in activity in their own businesses, supported by earlier OCR cuts and a lift in export incomes, particularly in the dairy sector. However, heightened uncertainty ahead of the general election and heightened global geopolitical tensions pose downside risks to this early phase of the recovery.
Although spare capacity remains in the economy, rising demand is beginning to reduce this slack. The improvement in activity has been broad-based across sectors, and firms’ hiring and investment intentions have lifted. Nonetheless, the recovery remains fragile, and any postponement of spending and investment decisions could dampen momentum.
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.