Is the party over?

Posted by lindsay on September 1, 2014

Is the party over for the NZ economy? It has been one of the star performers in the OECD this year, but New Zealand’s economy could be heading for a fall leading economists predict.

Big dairy payouts, the Canterbury rebuild, surplus net migration figures and low interest rates have all played their part in New Zealand having a so called “rockstar economy.”

With annual GDP growth of 3.3 per cent and unemployment at 5.6 per cent New Zealand has been at the top end of OECD countries.  

However the Canterbury rebuild is nearing completion, interest look set to rise next year and migration to New Zealand is predicted to fall. Dairy payouts to farmers have also dropped this year and are likely to remain low.

Westpac chief economist Dominick Stephens told Fairfax Media last week that he was concerned New Zealand’s growth wasn’t sustainable.

“When the Canterbury rebuild ends people will be surprised at the size of the downturn,” he said.

“We are forecasting zero net migration for 2018 and one day interest rates will get big enough to crush the housing market.

“My concern is those things will all happen together.”

ANZ senior economist Sharon Zollner warned a soft landing was unlikely to happen.

“People say the New Zealand economy has three gears, first, fifth and reverse. For us to engineer a soft landing is hard,” she said.   

With the election now no longer looking like a one horse race adding further uncertainty it could be a rocky road ahead for the New Zealand economy.