The New Zealand economy remains a solid performer, but is going through a period of transition. We expect less impetus to growth from net migration over the next few years and believe the construction sector is at capacity. On the upside, the terms of trade are at an historical high, and consumer spending is expected to hold up well on the back of solid growth in labour income and fiscal support. But the big change since our last report is that fiscal policy looks set to be more stimulatory from 2018 than we had previously assumed.

Key points:
  • Change of government adds extra uncertainty
  • Immigration slowing - but how far and how fast?
  • Fiscal policy expected to turn expansionary
  • Household spending solid, but housing imbalances remain
  • Labour market continues to perform strongly
  • Inflation and monetary policy outlook remains uncertain

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