Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Quarterly Forecast: The maturing of a “rock star” economy

Media release

ASB Quarterly Economic Forecasts July 2014

EMBARGOED UNTIL 5am Tuesday July 29 2014

The maturing of a “rock star” economy

NZ economy maintains good momentum in 2014.

But signs emerge that growth will moderate to a more sustainable pace next year.

High NZD remains a dilemma for the RBNZ as it continues on its tightening path.

Growing divergence between global commodity export prices and the NZD poses on-going dilemma for the Reserve Bank.

Momentum continues in the New Zealand economy in 2014, according to the latest ASB Quarterly Economic Forecasts. But signs have emerged that growth will moderate to a more sustainable pace over 2015.

ASB Chief Economist Nick Tuffley says New Zealand’s economic growth is running above trend, led by a surge in construction activity.

“We are seeing this construction growth flow through to stronger demand across a broad range of sectors,” Mr Tuffley says.

However, there are signs the New Zealand economy is beginning to respond to higher interest rates.

“The easing in business and consumer confidence more recently point to a moderation in growth next year.” Mr Tuffley says. “This will see New Zealand economic growth moderate to a more sustainable pace.”

The ongoing decline in global commodity export prices, particularly for dairy, has softened the tone of recent developments. But despite these commodity price declines, the NZ dollar remains high.

“The growing divergence between global commodity export prices and the NZD poses a continued dilemma for the RBNZ,” Mr Tuffley says.

Yield demand for the NZD remains strong in the low foreign exchange volatility environment.

“The NZD strength is exacerbated by the RBNZ’s continued path to raising interest rates. This is in stark contrast to the loose monetary policy still undertaken by many central banks,” Mr Tuffley says.

“We expect the NZD will soften, but not materially until next year when other major central banks look to return monetary policy to more normal settings. For now, continued NZD strength is one factor likely to keep the RBNZ on hold until late in the year.”

ASB economists expect the OCR will peak at 4.5% in the second half of next year.

“Housing market activity has already started to moderate, and we expect further moderation over the next couple of years as the higher interest rates and new housing supply restrain housing demand,” Mr Tuffley says.


ENDS


© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Must Sell 20 Petrol Stations: Z Cleared To Buy Caltex Assets

Z Energy is allowed to buy the Caltex and Challenge! petrol station chains but must sell 19 of its retail sites and one truck-stop, the Commerce Commission has ruled in a split decision that acknowledges possible retail price coordination between fuel retailers occurs in some regions. More>>

ALSO:

Huntly: Genesis Extends Life Of Coal-Fuelled Power Station To 2022

Genesis Energy will keep its two coal and gas-fired units at Huntly Power Station operating until 2022, having previously said they'd be closed by 2018, after wringing a high price from other electricity generators who wanted to keep them as back-up. More>>

ALSO:

Dammed If You Do: Ruataniwha Irrigation Scheme Hits Farmer Uptake Targets

Enough Hawke's Bay farmers have signed up for water from the proposed Ruataniwha Water Storage Scheme for it to go ahead as long as a cornerstone institutional capital investor can be found to back it, its regional council promoter announced. More>>

ALSO:

Reserve Bank: OCR Stays At 2.25%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2.25 percent, in a decision traders had said could go either way, while predicting inflation will pick up as the slump in oil prices washes out of the data and capacity pressures start to build in the economy. More>>

ALSO:

Export Values Down: NZ Posts Biggest Annual Trade Deficit In 7 Years

New Zealand has recorded its biggest annual trade deficit since April 2009, reflecting weaker prices of agricultural commodities such as dairy products, beef and lamb, and increased imports of vehicles and machinery. More>>

ALSO:

Currency Events: NZ's New $5 Note Wins International Banknote Award

New Zealand’s new Brighter Money $5 note has been named Banknote of the Year in a prestigious international competition. The $5 note was awarded the IBNS Banknote of the Year title at the International Bank Note Society’s annual meeting. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news