New Zealand Economic Forecast

New Zealand Economic Outlook

November 14, 2017

Jacinda Ardern was sworn in as Prime Minister on 26 October, after her Labour Party formed a coalition with NZ First. However, both parties are relying on the support of the Greens for a parliamentary majority. The new government swiftly moved to ban foreigners from buying existing homes in a bid to cool the housing market, and announced a review of the Central Bank’s mandate, with a view to prioritizing employment. The latter change would enable more expansionary fiscal policy without necessarily provoking a tighter monetary stance; the new administration is expected to spend significantly more on health, education and a homebuilding program over the coming years. On the international front, the government has renegotiated aspects of the Trans-Pacific Partnership, clearing the way for New Zealand to sign the deal. However, firms still remain wary of the possibility of greater protectionism and a clamp down on immigration, as evidenced by a sharp fall in business confidence in October. Other economic indicators are more positive: Consumer confidence remained well in positive territory in the same month, while the unemployment rate dipped to a multi-year low in Q3.

New Zealand Economic Growth

Going forward, the economy should be buoyed by looser fiscal policy and low interest rates. However, slow improvements in productivity and a shortage of skilled labor will drag on growth. Panelists surveyed this month expect the economy to expand 2.9% in 2018, unchanged from last month’s forecast, and 2.6% in 2019.

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New Zealand Facts

Bond Yield2.781.20 %Dec 06
Exchange Rate0.69-1.69 %Dec 06
Stock Market3,7330.11 %Dec 06

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