New Zealand’s GDP likely to grow modestly in near term at above-trend pace

New Zealand’s economy continues to perform decently. The annual economic growth has quickened to 2.8 percent year-on-year. Also, forward looking indicators and financial conditions imply that economic growth would accelerate above 3 percent over the next couple of quarters, said ANZ in a research report.

This is almost near the trend level. Consumer and business sentiment are currently at decent levels, while companies are continuing to hint at intention to hire and invest. The jobless rate in New Zealand is lower and the real household income growth is above-average pace at the moment.

“We forecast GDP growth to accelerate modestly in the near term, continuing at an above-trend pace. We forecast full-year growth of 3.2 percent over 2016 and 3.3 percent over 2017,” added ANZ.

With the net migration, New Zealand’s population growth should continue to be solid for certain time. This is also because New Zealand will continue to be an attractive destination for migrants in a world of Brexits and weak economic performance elsewhere, according to ANZ. The annual per capita growth is likely to rebound towards 1.5 percent in the next 12 months.

Meanwhile, despite a stronger NZD, financial conditions continue to be supportive. Asset prices are robust, interest rates are low and commodity prices have started rebounding.  That is providing a wide-based level of financial conditions, which is helpful for strong growth.

In the mean time, the construction sector pipeline continues to be huge. Continuing drops in borrowing rates, solid existing house price growth are strong boosting forces, according to ANZ. Huge infrastructure projects are also spurring spill-overs into increased commercial activity.

“We forecast total construction activity volumes to rise 5.0 percent and 3.8 percent in 2016 and 2017 respectively,” said ANZ.