Otago Property Investors Association Inc

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otago@nzpif.org.nz

News & Updates

Recent updates

26-11-2014

Returning to a more gradual but sustainable pace

The economy is growing, but the pace is moderating. Economic growth will average 2.5% in the next five years, after a strong 3.4% in 2014. One-off boosts are fading, but there is a durable underlying recovery taking place that is not built on fickle borrowing.

An independent take on the New Zealand economic outlook is available exclusively to NZIER’s members in the latest Quarterly Predictions.

An enduring recovery base

The New Zealand economy has grown strongly recently, made up of two parts: a gradual but sustainable underlying recovery and one-off boosts.

The core recovery has been moderate, but strong enough to generate jobs and income growth. Household and business behaviour is slowly returning to normal. This part of the recovery is durable as it is largely funded out of income, rather than borrowing.

But one-offs boosts are beginning to fade. An accelerating Canterbury rebuild was adding to economic growth. We expect this to peak in early 2015. The rebound from last summer’s drought is now past us. Dairy prices have halved in the last nine months and added some gloom to the rural economic outlook. Surging house sales and prices were adding to confidence and demand – but the housing market has moderated.

Two main risks

There are two key risks to the economic outlook: slowing global growth and the overvalued Auckland housing market. Weaker global growth will weigh on commodity prices, exports and the provincial economy. Any bursting of the Auckland housing bubble will dent consumer confidence and banks’ willingness to lend.

No inflation risk to raise rates

There is little inflation in New Zealand or globally. Despite a six-year economic recovery, growth is moderating and there are few signs of generalised inflationary pressures.

There are enough risks on the global front for the RBNZ to react to concrete signs of accelerating inflation – rather than pre-empting it and eroding economic growth and export competitiveness. We see no catalysts for interest rate increases until 2016.

For further information please contact: Shamubeel Eaqub on 021 573 218.

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