Key Facts

  • The latest ASB Quarterly Economic Forecast suggests the New Zealand economy is on a gradual upward trajectory, supported by strong migration and spending.
  • Inflation is beginning to fall, with food price inflation down to 6.3% YoY, a decrease from a peak of 12.5%.
  • Interest rates are expected to be kept on hold until early 2025 by the Reserve Bank.
  • The housing market has seen a rebound with rising prices and quicker selling times, driven by steady migration and increased housing demand.
  • Business confidence has continued to rise, with businesses seeing the economy move past its worst state.
  • Lower commodity prices and reduced demand for key exports are affecting the global economic outlook, with subdued growth anticipated.

Article Summary

The New Zealand economy is moving along an upward trajectory according to the latest ASB Quarterly Economic Forecast, despite the expectation that this momentum will increase gradually. ASB Chief Economist Nick Tuffley notes that they are beginning to see positive signs, such as declining inflation and a growing trend of strong migration that has allowed the country to avoid recession.

Interest rates, however, are predicted to remain stagnant until 2025, winching up pressure on homeowners. Meanwhile, the housing sector mirrors the country’s economic transition, with the market rebounding as prices rise and properties taking less time to sell. Tuffley expects the rekindling housing market to stimulate construction due to renewed confidence among investors and developers. Potential policy changes like the reinstatement of interest expense deductibility and shortening of the Brightline tax period can further enhance investor interest in properties.

On the business front, increased confidence amidst business owners is observed, however, high interest rates and weak growth could make businesses cautious about capital spending. Despite the economic recovery, a subdued global outlook, influenced by lower commodity prices, less demand for New Zealand’s main exports, and pressure on household budgets, could still pose challenges. Particularly, China’s less than expected post-COVID rebound is influencing the outlook and affecting New Zealand’s key commodity exports and the tourism sector.

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