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Analysts at TD Securities explain that New Zealand’s June year (fiscal year) 2018 GDP growth is sitting at 2.7%, a ‘breather’ after three consecutive years of blistering above-trend 3-4% GDP growth.

Key Quotes

“Growth is quite broad-based (private and public demand, and decent trade) and ahead of even more fiscal stimulus coming down the pipe (transfer payments hit bank accounts from 1 July, and while Kiwibuild may have a slower start, the commitment to the project remains).”

“High frequency data have also been upbeat. There were decent retail card sales over Jul/Aug, record high exports in July and a revival in housing sales and prices. Supporting our view that lower rates are not required, access to credit from households and business is not only a non-issue, but high LVR loans are accelerating this year.”

“The unemployment rate at 4.5% is already at the bottom of the RBNZ NAIRU range of 4.5-5.5% and we see it heading towards 4% by end-2019 as migration has peaked (without material government intervention) and labour demand remains solid. Inflation and inflation expectations are already tracking above 2% and expected to climb further due to the combination of a lower exchange rate, surging petrol prices and buoyant commodity prices more broadly.”