Westpac expects the government’s housing policy to cause a further slowdown in New Zealand's GDP growth, after data revealed the economy grew by only 2.9% in 2017.
Westpac’s team of economists have predicted the government’s plans, including curbs on foreign investment, will “cool” the housing market, leading to lower household spending and decreased confidence among employers and investors.
It comes after data released last week showed the economy running at softer-than-expected 2.9% growth, significantly lower than 3.9% in 2016.
In their weekly update to the market, Westpac economists said they expected the more “subdued backdrop” to persist in 2018, “as the new government’s policies weigh on growth”.
Economists believe the muted outlook will see the Reserve Bank retain the OCR rate at an historic low of 1.75% this week. Westpac said it expected “no surprises” after reading the GDP data: “Last week’s GDP and current account data were the final data releases ahead of this week’s RBNZ OCR review. With the GDP data printing only a touch below the RBNZ’s expectations, there was certainly nothing to prompt a change of tone from the RBNZ.”
Others are more upbeat about the nation’s long-term economic prospects, however. The latest New Zealand Institute of Economic Research Consensus Forecasts, released today, projects a stronger growth outlook over the next few years. NZIER's forecast from the major banks said government spending would increase consumer confidence, but warned the outlook for business was “mixed”. NZIER's report said inflation would remain “contained” until 2021.
