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New Zealand in 2014: Firing on all cylinders

HSBC Global Research

New Zealand in 2014: Firing on all cylinders

Growth is picking up pace in New Zealand and we expect the trend to continue through 2014 

- Post-earthquake reconstruction, a local housing boom and high export prices should support broad-based economic growth 

- We expect NZ dollar strength, underpinned by the healthy domestic economy, to remain a headwind for trade-exposed sectors 

After a number of years in the doldrums, we expect New Zealand’s growth to pick up strongly in 2014. Our forecasts for the coming year suggest that New Zealand is likely to outperform almost all other OECD economies (the exceptions are Chile, Israel and Mexico). 

Growth is expected to be supported by three key factors. First, a substantial post-earthquake reconstruction effort in the Canterbury region, following the earthquakes in 2010 and 2011. Rebuilding has already begun and is expected to run for a number of years yet. Second, a local housing boom, which is already underway and expected to continue. This boom has been fuelled by a combination of low interest rates and weak supply of housing, due to under-investment in recent years. Third, dairy export prices have ramped up substantially in recent years as a result of strong Asian demand. This is lifting rural incomes. Overall, annual GDP growth is expected to pick up to 3.4% in 2014 from 2.8% in 2013.


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