The New Zealand economy will grow strongly over the next
couple of years, according to the latest NZIER consensus
forecasts. Coming at the same time as the improved forecasts
from the Treasury, it could be a good year ahead. Business
editor Dene Mackenzie reviews the latest data.
The stars appear to be aligning for the Government as it
prepares for an election year.
Business and consumer confidence continues to improve, the
latest forecasts from the Treasury are better than expected
and consensus forecasts are picking a good year ahead for
businesses and households.
One of the key measures of a strong business sector is
measured by how long people take to pay their bills. And
again there is good news.
The Dun & Bradstreet Trade Payments Analysis, released on
Wednesday, showed on-time payments had reached a 12-month
D&B New Zealand general manager Lance Crooks said the
number of business invoices being paid on time reached the
12-month high as the finances of New Zealand companies
continued to benefit from a steady improvement in the local
economy and healthy consumer confidence.
Analysis of company invoice payments during the September
quarter showed 61% were made within 30 days, an increase from
59% in the previous quarter and 60% in the previous
corresponding period. The majority of late invoice payments
were made between one and 30 days past standard terms.
The increase in prompt invoice payments resulted in the
average length of time taken for businesses to pay each other
falling for the second consecutive quarters to 41 days, he
''There is a clear relationship between healthy cash flow and
a strong business sector. With favourable economic conditions
in New Zealand, businesses have had a greater capacity to
meet their financial obligations on time and, in turn, invest
back into their operations and the economy more generally,''
Mr Crooks said.
Earlier this week, the Treasury produced some economic
forecasts which received positive reactions from business
ASB chief economist Nick Tuffley says the Government's
books are ''looking tidy''. As the 2014-15 surplus drew closer,
attention, particularly in an election year, would naturally be
drawn to the more significant surpluses of subsequent years.
''There is some flexibility to consider modest tax cuts or
spending increases, timed towards the end of the next
The tidy look incorporated in the half-year economic update
was underpinned by an expected lift in the economic outlook
and resultant lift in revenues, he said.
A key positive shift compared with the May Budget was a
levelling off in the net debt ratio around its current level,
leading to a material reduction in net debt over the next
four years. As a result, the major news for markets was the
improvement in the debt position enabled the Debt Management
Office to reduce the bond tender programme - it might even
run a bond buyback in early 2014, Mr Tuffley said.
''Overall, we agree with the Treasury's assessment of the
economy. The economic recovery is becoming more entrenched
with solid growth anticipated over 2014. This will leave the
New Zealand Government in a somewhat envious position of
having choices, particularly when compared with its developed
country peers,'' he said.
PwC director Chris Money said the half-year update
highlighted a cautiously optimistic approach by the Government.
The Government continued to predict a return to surplus in
2014-15. In addition, the economy was forecast to grow by an
average of 2.6% each year over the next five years and the
unemployment rate is expected to fall below 6% in 2014-15 and
down to 4.8% in 2018.
The Government faced five key challenges leading into Budget
2014 and the ensuing parliamentary term: striking a balance
between affordability, demand and supply for housing; getting
a sustainable, high-value public service; driving growth in
the regions; globally competitive cities; and managing
demographic change in a fiscally responsible manner.
''Budget 2014 will be pivotal, not just to the current
Government's hopes of winning the 2014 election. It will also
largely set the scene for the hopes of the Government to win
a fourth term in 2017,'' Mr Money said. The New Zealand
Institute of Economic Research consensus forecasts indicate
broad-based, stronger growth ahead.
Economic growth was forecast to pick up from 2.8% in the
March 2014 year to 3.1% the following year.
Economic growth would be across household spending,
investment and exports.
Exports this year were depressed by a drought, but would grow
strongly in future years. Dairy production had already
recovered strongly from the summer drought.
The labour market would improve, the forecasts said.
''There will be more jobs, fewer unemployed and wages will
grow. The pace of improvement is better than previous
On the down side, inflation would increase towards 2.5% over
the next few years and interest rates would increase from
early next year.
The Westpac McDermott Miller December consumer confidence
index came out earlier this week at 120.1 points, up 4.8
points on the September quarter. Consumers had become more
optimistic about the economy and more upbeat about their own
The professed willingness of consumers to spend had not
increased as much but on balance, that suggested consumer
spending would continue at a solid clip but might not
accelerate much further.
''If any more evidence was needed the economy is now in
recovery mode, this is it,'' Westpac chief economist Dominick
''The consumer confidence index has risen to its highest
level since September 2009, when the economy experienced its
first burst of recovery.''
Compared with 2009, consumers were both much more upbeat on
the near-term economic outlook and more optimistic about
their own finances, he said.
In fact, people were the most upbeat about their finances
they had been in six years. Economic optimists now
outnumbered pessimists by the widest margin since December
''What's more, the improvement has been remarkably widespread
across age, income and regional groups.''
The results were in keeping with the facts on the ground, Mr
The construction sector was ramping up, not just in
Canterbury, the job market was on the mend, house and share
prices had continued to rise and rural incomes were getting a
large boost from post-drought recovery and sky-high export
Consumer confidence in rural regions had risen ''particularly
sharply'' in the past few surveys, he said.
Given all the positivity, it could be expected there was a
similar lift in the survey's questions relating more directly
to spending appetites. But those had not moved much. The
number of households saying now was a good time to buy a
major household item, or they would spend a cash windfall,
was lower than six months ago.
Mr Stephens emphasised that did not equate to renewed
consumer retrenchment. The survey's various spending
questions were still at or slightly above historical
When people said their finances were improving they also
tended to spend more. But it was a note of caution in what
was a very positive report.
The most obvious culprit was housing-related concerns. With
house prices marching steadily higher and restrictions on low
equity borrowing now in place, the hurdle to home ownership
had risen, Mr Stephens said.
Also, talk interest rates would rise next year might have
made homeowners more uncertain about future property values
and their own future mortgage payments.
Global accounting body CPA Australia says the prospects for
New Zealand businesses are looking very positive, following
the Government's release of its half-year fiscal and economic
CPA Australia chief executive Alex Malley said the figures
were the strongest evidence yet the New Zealand economy was
recovering, and underpinned the Government's improving
''Overall, the business community will take confidence from
these projections, particularly the continued GDP growth
peaking at 3.6% in 2015, and we should see that translate
into new jobs and increased incomes.''
But a recent survey conducted by CPA Australia showed small
businesses might yet need more convincing, he said.
The Asia-Pacific Small Business Survey found, compared with
their peers in other regional markets, Kiwi small business
owners were less confident in the prospects for their own
businesses in 2014 than they were for the overall economy.
CPA Australia was supportive of the Government's efforts to
boost the productivity and competitiveness of the export
sector, particularly as New Zealand looked to exploit
opportunities in Asian markets, Mr Malley said.
Labour Party finance spokesman David Parker is not so
convinced the benefits of the so-called good news are flowing
down to others in less fortunate positions.
The duty of a government was to ensure all Kiwis received a
benefit, he said.
''The real secret of these forecasts is National has
overlooked the interests of the vast majority of New
''National conveniently seems to have forgotten the
overwhelming majority of New Zealanders aren't better off
they they were five years ago. Wages are stagnating and job
growth is lagging behind economic growth.''
Most New Zealanders were missing out on a ''fair share'' of
the recovery, Mr Parker said. In the last quarter, wage
growth was half that of inflation.
Prime Minister John Key and Finance Minister Bill English
were ignoring the majority of rewards were going to the small
proportion of the population that were already the best off,