NZ economy – changing down a gear?

NZ economy – changing down a gear?

Forward-looking indicators give cause for optimism in the latest BusinessNZ Planning Forecast.

The Forecast for the September quarter signposts economic growth at an annual rate of around 3 percent, at mixed levels across various sectors and regions.

Business and consumer confidence remain positive, meanwhile the Christchurch rebuild and Auckland housing growth are driving a buoyant construction sector.

While strong net migration inflows and robust housing and construction activity could be expected to increase inflationary pressures, Reserve Bank statements indicate that the economy has already responded to interest rate hikes earlier this year.

BusinessNZ Chief Executive Phil O’Reilly says with pre-election uncertainty now resolved, it will be hoped that regulatory policy can be improved to address some of the factors holding the economy back, including housing affordability.

“It is helpful that the issue has been taken out of the political arena, with land supply processes now being reviewed by the Productivity Commission.”

Mr O’Reilly said the health of the economy would be significantly influenced by prudent management of government spending.

“The combined surplus between now and mid-2018 is forecast to be $6 billion – down $1.5 billion on the May Budget forecast – so spending restraint will be needed.”

He said risks to the economy include the recent drop in global dairy prices and high levels of private debt, in particular agricultural debt, of over $50 billion.

The BusinessNZ Planning Forecast incorporates BusinessNZ’s Economic Conditions Index (ECI) which tracks 33 indicators, including GDP, export volumes, commodity prices and inflation, debt and confidence figures.

The ECI sits at 10 for the September 2014 quarter, up 6 on the previous quarter and up 5 on a year ago.

The BusinessNZ Planning Forecast for the September 2014 quarter.

Contact Phil O’Reilly 04 4966552 or Kathryn Asare 021 555 744

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29 Sep, 2014

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