New Zealand ‘rock star’ economy outperforms relative to peers, HSBC
Global banking giant HSBC has forecast an above-trend GDP growth of 3% for New Zealand this year, and expects the Reserve Bank to lift its policy rate in the second half of 2018, a new report reveals.
HSBC Australian and New Zealand economists said in a report titled the ‘rock star’ has new managers report: “New Zealand’s economy has been a rock star. Growth has been strong, the economy has outperformed relative to its peers, and the budget is in surplus.
“The economy’s rock star performance was reaffirmed in the Q3 GDP figures, published in late December 2017. These numbers showed significant upward revisions to GDP, which now show that growth averaged 3.7% a year between 2014 and 2016 – up form 3% previously. Keep in mind that trend growth is only 2.5 – 2.75%. Growth slowed a bit in 2017, to 2.8% but is expected to lift to 3% in 2018.
“The mix of growth has been positive, with solid growth in exports and household consumption. Although growth in business capital spending has slowed somewhat, due to weaker construction activity, investment still has some momentum.
“The labour market is also tightening, with the unemployment rate nearing full employment at 4.6%. At the same time, CPI inflation is back around RBNZ’s ‘near 2%’ target.
“The challenges are that business confidence has fallen recently, the housing market has cooled, and there are doubt over whether the considerable pipeline of building work can be delivered,” the report stated.
It continued to predict a shift in the policy mix this year, with plans to boost public spending on health, education and infrastructure. A plan to cut down on inward migration are expected to tighten the labour market delivering higher wages growth.
Key highlights:
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HSBC Australian and New Zealand economists said in a report titled the ‘rock star’ has new managers report: “New Zealand’s economy has been a rock star. Growth has been strong, the economy has outperformed relative to its peers, and the budget is in surplus.
“The economy’s rock star performance was reaffirmed in the Q3 GDP figures, published in late December 2017. These numbers showed significant upward revisions to GDP, which now show that growth averaged 3.7% a year between 2014 and 2016 – up form 3% previously. Keep in mind that trend growth is only 2.5 – 2.75%. Growth slowed a bit in 2017, to 2.8% but is expected to lift to 3% in 2018.
“The mix of growth has been positive, with solid growth in exports and household consumption. Although growth in business capital spending has slowed somewhat, due to weaker construction activity, investment still has some momentum.
“The labour market is also tightening, with the unemployment rate nearing full employment at 4.6%. At the same time, CPI inflation is back around RBNZ’s ‘near 2%’ target.
“The challenges are that business confidence has fallen recently, the housing market has cooled, and there are doubt over whether the considerable pipeline of building work can be delivered,” the report stated.
It continued to predict a shift in the policy mix this year, with plans to boost public spending on health, education and infrastructure. A plan to cut down on inward migration are expected to tighten the labour market delivering higher wages growth.
Key highlights:
- Growth is set to pick up in 2018, supported by exports of tourism and dairy products, rising construction activity, and fiscal spending
- A tightening labour market is expected to drive a modest pick-up in wage growth and domestic inflation
- The lift in growth and inflation is set to see the RBNZ begin to lift its cash rate in H2 2018.
Related stories:
The case for robo-advisers, HSBC
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