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


Opportunity & Uncertainty in Post-Election Economy

Opportunity & Uncertainty in Post-Election Economy

• Election-related uncertainty to be short-term only

• Rapid minimum wage increases to boost NZ wage growth

• Housing market to remain cool with investors more cautious

ASB economists expect election-related uncertainty to dampen growth over the second half of the year, but say this will be short lived only and remain positive on the growth outlook for New Zealand.

Economic growth is expected to firm to around 3% by the middle of 2018, according to the bank’s Quarterly Economic Forecasts.

ASB chief economist Nick Tuffley says the change in direction with a new Government inevitably brings about a period of uncertainty to the business environment, with the risk decisions get deferred for a period.

“But we emphasise that any uncertainty is going to be short-lived. It’s important to remember the underlying economic picture is what will have the dominant influence on the business environment. Local and overseas influences point to overall economic growth around 3%, which is still pretty decent,” Tuffley says.

“Even with some looming changes to the Reserve Bank’s policy target, interest rates are still likely to be low for some time, certainly over the next year.”

Mr Tuffley says some ASB Economics forecasts have been tweaked to account for likely policies of the new Government. Key changes so far include a sharper fall in net migration, faster wage growth and slightly weaker house prices.

“While it’s early days for the new Government, there are some broad policy implications that will influence the economy – inbound migration will slow more rapidly, cooling population growth,” Tuffley says.

“That means overall economic growth will not be quite as strong, although there will be some offset from stronger government spending. The policy balancing act will be reducing the inflow without making it impossible to fill some job vacancies for which migrants are the only real option.

“Minimum wage increases will be more rapid than in recent years, and likely to flow over to other wage rates if businesses want to retain a degree of relativity to the minimum wage. For small businesses, these wage pressures can be hard to absorb. It will really put the focus on seeking productivity gains to help ‘pay’ for the wage increases.”

Housing outlook – key area of uncertainty

Housing will see different influences under the new government, Tuffley says.

“Future tax changes will make property investors more cautious, with flow-on effects to business supporting investors and real estate. But at the same time, the Government will be pushing hard to build more homes in a number of main centres around the country.

“We expect housing construction to continue to strengthen in Wellington and remain steady in Auckland, as ongoing housing supply shortages underpin construction demand in these cities.”

Meanwhile, house-building demand is likely to ease from cyclically-high levels throughout the rest of the country as population growth slows.

“The Labour/NZ First Government housing policies are likely to result in slightly less pressure on house prices than we previously expected. Nonetheless, we continue to expect the physical shortage of housing in Auckland and Wellington to support house prices.”


© Scoop Media

Business Headlines | Sci-Tech Headlines


Stats NZ: Consents For New Homes At All-Time High

A record 41,028 new homes have been consented in the year ended March 2021, Stats NZ said today. The previous record for the annual number of new homes consented was 40,025 in the year ended February 1974. “Within 10 years the number of new homes ... More>>

Stats NZ: Unemployment Declines As Underutilisation Rises

The seasonally adjusted unemployment rate decreased to 4.7 percent in the March 2021 quarter, continuing to fall from its recent peak of 5.2 percent in the September 2020 quarter but remaining high compared with recent years, Stats NZ said today. ... More>>


Digitl: The Story Behind Vodafone’s FibreX Court Ruling

Vodafone’s FibreX service was in the news this week. What is the story behind the Fair Trading Act court case? More>>

Reserve Bank: Concerned About New Zealand's Rising House Prices

New Zealand house prices have risen significantly in the past 12 months. This has raised concerns at the Reserve Bank of New Zealand – Te Putea Matua about the risk this poses to financial stability. Central banks responded swiftly to the global ... More>>

Westpac: Announces Strong Financial Result

Westpac New Zealand (Westpac NZ) [i] says a strong half-year financial result has been driven by better than expected economic conditions. Chief Executive David McLean said while the global COVID-19 pandemic was far from over, the financial effect on ... More>>

MYOB: SME Confidence In Economic Performance Still Cautious

New insights from the annual MYOB Business Monitor have shown the SME sector is still cautious about the potential for further economic recovery, with two-in-five (41%) expecting the New Zealand economy to decline this year. The latest research ... More>>