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Record growth in gross domestic product a highlight for 2013

Record growth in gross domestic product a highlight for 2013, UC expert says

December 3, 2013

The 2013 economic highlight for New Zealand is the record growth in gross domestic product, driven largely by the Canterbury rebuild and housing demand in Auckland, a University of Canterbury (UC) business expert says.

Professor Adrian Sawyer says the record growth is even more striking when much of the world remains economically challenged with little to no growth. 

``For 2014, growth is likely to continue with the Canterbury rebuild momentum increasing and with a potential challenge from expectations of the composition government following the 2014 general election.

``A Labour-Greens government would be expected to lead to a revisiting of current tax and expenditure policies, which may see a period of business uncertainty.

``Overall most of the growth is expected to be in infrastructure and housing, which is likely to be supportive of a longer period of growth, something that New Zealand does not experience often. Should growth become too high, or as demand overall increases and pressure comes on for higher wage increases following rising inflation, interest rates will have to rise. 

``Of interest too will be the increases in profits which, in turn, should see an increase in the corporate tax take. PAYE and GST should also increase with the growing labour force to undertake the rebuild, especially in Christchurch city. To this end, the tax take increase will be of some benefit to the Government as it moves into an election year.

``Of concern, however, is the patchy nature of the rebuild in Christchurch and potentially the choices made in terms of what areas to repair and redevelop first. The result of the Christchurch East by-election sends a signal from the voters, even with a low turnout, concerning their dissatisfaction with the Government's approach to the rebuild and repair work in the east of Christchurch.’’ 

Professor Sawyer says the record trading day on the New Zealand sharemarket last week was largely due to major fund provider, Morgan Stanley Capital Index (MSCI), re-balancing its portfolio. 

There has also been a substantial increase in stock available with the Government's partial assets sales this year, the latest being a partial sell down of Air New Zealand. Many large investors will be needing to get their asset mixes rebalanced or will take advantage of more stock being present in the market. 

Professor Sawyer says, in part, this is likely to have attributed to the small decline in the NZX 50 Index in recent weeks from recent highs.

``Closer to home, and of interest to UC over the next few years, will be the flow of funds from the Government to support the new UC building programme including the new Regional Science and Innovation Centre and new engineering infrastructure. A total of $1.1 billion will be spent on revamping the UC campus over the next 10 years.’’


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