NZ economy's momentum builds

Craig Ebert
Craig Ebert
New Zealand's September quarter GDP (gross domestic product) was not as strong as it looked but there was no denying the economy was gathering momentum, BNZ senior economist Craig Ebert said yesterday.

Rebounding dairy production drove a 1.4% increase in GDP for the September 2013 quarter - the biggest increase since the December 2009 quarter, Statistics NZ figures showed.

A strong increase in dairy production was the main contributor to a 17% rise in agriculture, which makes up about 5% of the New Zealand economy.

Mr Ebert said the economy was eyeing a ''genuinely'' strong rate of expansion for next year, underscoring the upside risk around the official cash rate.

''We remain of the view the Reserve Bank will wait until its March monetary policy statement before actually increasing its cash rate while using the January 30 OCR review to set this up.''

That view was supported by the fact the New Zealand dollar did not drop on news of the United States Federal Reserve reducing its support to the US financial markets, he said.

The Reserve Bank would probably be annoyed. It had been, rightly or wrongly, waiting for the Fed to taper to take pressure off the kiwi dollar.

''But it would seem the market will have none of it, instead looking to the reason for the taper - an improving US economy - and increasingly robust New Zealand economic indicators in order to maintain a bid on the New Zealand dollar. And who can blame them?''

The third quarter detail was volatile and, on balance, not nearly as impressive as the headline results, Mr Ebert said.

While everyone was expecting a bounce-back in rural production from the drought-affected first half, few would have picked the 17% quarterly jump.

Statistics NZ acting national accounts manager Steffi Schuster said dairy farming had bounced back from the drought this year.

''The increase in agriculture is the largest in more than 25 years, as good weather boosted production well above the weak June quarter,'' she said in a statement.

Statistics NZ said dairy product manufacturing also increased during the quarter, which contributed to a 1.5% rise in total manufacturing.

Finance Minister Bill English said it was pleasing to end the year with more positive news after robust forecasts in the half-year update released this week.

''New Zealanders' hard work is now starting to pay dividends. Despite the worst drought for several decades earlier this year, New Zealand has one of the faster-growing developed economies in the world.''

On Wednesday, the ANZ confirmed business confidence was at its highest level since February 1999, with manufacturing confidence hitting a 15-year high.

The current account deficit was half what it was five years ago and the Government was on track to fiscal surplus in 2014-15, he said.

''However, it is early days. The Government was elected to provide conditions for higher long-term growth for New Zealanders and their families.

"There is a long way to go before we have locked that in.''

 

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