The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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Seasonally adjusted merchandise exports

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Source: Statistics NZ, ANZ Research

However, the abrupt moderation in the housing market suggests the economy is about to screech to a halt. 

“[NZ] merchandise exports in December were spectacular.”

But this time is, in fact, different – the slowdown has been caused by Reserve Bank macro-prudential policy restricting credit availability, not higher interest rates.

Real GDP growth and house price inflation

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Source: Statistics NZ, REINZ, ANZ Research

Headwind

The fact consumer confidence is holding up well suggests housing won’t be quite the headwind for growth the above chart would suggest.

We’re also discounting the fall in the activity outlook in our business confidence survey to some extent for now.

Anecdote suggests it might continue to bounce back as uncertainty related to the unexpected election result wanes. We are assuming any near-term growth wobble won’t be long-lasting.

ANZ Business Outlook Own Activity Index & ANZ Roy Morgan Consumer Confidence

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Source: ANZ, Roy Morgan

Nonetheless, with net migration looking like it has topped out, labour force participation at a record high, and workers already working long hours, New Zealand will need a rapid productivity turnaround if recent growth rates are to be maintained.

Growth at par would actually be a pretty solid outcome given we are nine years into an economic expansion with signs of capacity pressure evident, particularly in the construction sector but also more broadly.

Fortunately for heavily indebted households, the feed-through into inflation seems to have broken down, so we see the Reserve Bank on hold until the second half of next year.

Non-tradable inflation versus capacity measures

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Source: NZIER, Statistics NZ, ANZ Research

Sharon Zollner is Chief Economist at ANZ NZ

Topics: consumers economy exports GDP housing Inflation migration New Zealand reserve bank