13 Feb 2023
New Zealand Outlook: Brake Point
Miles Workman |
Recession looms in New Zealand as inflation crackdown bites.
16 May 2023
New Zealand Outlook: Rates Ruffle Feathers
The impact of the Reserve Bank of New Zealand’s tighter monetary policy will be hard to miss in coming months. The economy will slow as the lagged impact of rate rises takes its toll.
A stagnant housing market, weakening labour demand, slower household spending and reduced business and residential investment will see the economy slip into recession in the second half of the year.
"While the economy could surprise us, risks are still skewed to the RBNZ needing to do more to get inflation down."
Whether inflation has been tamed and, subsequently, whether there will be a need for more rate rises is unclear.
On balance, we see the outlook skewing towards the Reserve Bank of New Zealand sooner or later deciding more is needed to get inflation down.
That view is not set in stone. Ongoing supply-side recovery is good for both growth and bringing inflation down – it could be a stronger force than our forecasts build in.
Here’s the story in charts:
New Zealand: the way ahead…
A recession is looming in New Zealand and slower domestic demand will more than offset any boost provided by a recovery in exports.
Consumer spending and investment will come under pressure as higher rates bite and job security deteriorates.
Labour demand is easing just as imported labour supply is surging.
Higher unemployment and slower wage growth are expected which will guide non-tradables inflation lower.
The external imbalance will improve but it won’t be fun with weaker demand key.
While the economy could surprise us, risks are still skewed to the RBNZ needing to do more to get inflation down.
Sharon Zollner is Chief Economist for New Zealand at ANZ
Charts source: Stats NZ, MBIE, RBNZ, Macrobond, ANZ Research
This is not personal advice nor financial advice about any product or service. The opinions and research contained in this document are provided for information only, are intended to be general in nature and do not take into account your financial situation or goals.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
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