The worst is over – economist

He details the drivers of stronger growth

The worst is over – economist

It’s time to rejoice as the worst is over and economic recovery is more likely to be under              way, according to a Westpac economist.

Dominick Stephens, chief economist at Westpac, noted that winter was full of bad news – including GDP growth slowing, business confidence plummeting, and trade war fears growing. However, latest data revealed solid gains in retail and agriculture, rising house prices, and construction boom.

“The slowdown intensified in the September quarter, but recent data tentatively suggests we are past the worst of it,” Stephens told Stuff.co.nz. “GDP for the September quarter, which will be released towards the end of this year, is shaping up to be particularly weak – we expect an increase of just 0.3 per cent.”

Read more: Westpac reports balanced financial performance

Stephens pointed out that low interest rates, increasing fiscal stimulus from the government, and stronger construction boom could be the drivers of stronger growth in the future – in addition to improvement in international outlook.

However, he clarified that they predicted that GDP growth for 2019 will come in at just 2.2%, the lowest level in almost a decade.

“Our long-held view has been that fiscal spending and accommodative monetary policy would help to lift the economy out of the mire, and recent data is starting to support that view,” Stephens said. “We expect to see a more convincing lift in the economy's momentum over the next two years, with the pace of annual growth peaking at around 3 per cent.”

“The causes of low business confidence are multifaceted, reflecting concerns about government policies, rising costs of doing business, and the difficulty of raising prices in the face of local and global competition,” he added. “None of these issues will be directly alleviated by lower interest rates or fiscal stimulus. We think that businesses will remain reluctant to hire and invest for a while yet.”

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