Country Forecast New Zealand December 2017 Updater

Country Forecast New Zealand December 2017 Updater

  • December 2017 •
  • Report ID: 359016 •
  • Format: PDF


  • New Zealand will continue to benefit from a stable political environment in 2018-22. The Economist Intelligence Unit expects the governing coalition between the Labour Party and New Zealand First (NZ First) to serve a full term in office. However, policy differences between the parties and with the Green Party, which supports the coalition on key votes, will intensify in 2019-20.
  • The Labour-NZ First coalition still needs to flesh out its policy agenda, but it will look to tighten rules on immigration and foreign purchases of residential housing. We expect the new government to be more interventionist than its predecessor.
  • We forecast that modest budget surpluses will be maintained in 2018-22. Additional spending relative to that proposed by the previously ruling National Party will be partly funded by repealing the cuts to personal income tax due to take effect from April 2018, which the former government legislated in May 2017.
  • We expect the Reserve Bank of New Zealand (RBNZ, the central bank) to keep its policy interest rate, the official cash rate, unchanged at 1.75% in 2018, but rates will rise from the second half of 2019 to head off inflationary pressures stemming from higher import prices. The government has strongly indicated that it may instruct the RBNZ to shift from solely targeting inflation towards also focusing on achieving full employment.
  • We estimate that real GDP, measured on an expenditure basis, expanded by 2.6% in 2017. In 2018-22 we forecast GDP growth of 2.1% a year on average. Weaker population growth and the winding-down of post-earthquake reconstruction work will dampen the expansion of domestic demand.
  • The headline inflation rate will remain comfortably within the central bank's 1-3% target band over 2018-22, with a modest tightening of monetary policy helping to cool inflationary pressures later in the forecast period.
  • A narrowing of the differential between policy interest rates in the US and New Zealand will put downward pressure on the local currency's exchange rate in 2018. This will be exacerbated by the effects of slower economic growth in China, New Zealand's main export market. The exchange rate is forecast to average NZ$1.57:US$1 a year in 2018-22, from an estimated NZ$1.41:US$1 in 2017.
  • The current-account deficit will average the equivalent of 3.4% of GDP in 2018-22 as shortfalls on the trade and income accounts more than offset a surplus on the services account.


Loading...

We are very sorry, but an error occurred.
Please contact support@reportbuyer.com if the problem remains.