2.2%-2.7% growth tipped

New Zealand's slowing economy is still expected to have delivered annual growth rates in a range of 2.2%-2.7%, according to analysts and the Reserve Bank.

The country's annual current account deficit is also expected to have widened to 3.6% of GDP, matching the December 2012 deficit, which was the highest deficit since the 2007-08 global financial crisis.

Stats NZ is due to release balance of payments data on Wednesday and GDP figures on Thursday.

Westpac is expecting a 0.3% rise in GDP for the quarter to December and ANZ a 0.6% rise, while their annual growth expectations are 2.2% and 2.5% respectively. The Reserve Bank is expecting annual growth of 2.7%.

Westpac senior economist Michael Gordon said he thought the quarterly rise would be less than market expectations and those of the Reserve Bank.

"Both the New Zealand and Australian economies have slowed in recent times, but for different reasons.''

In Australia, falling house prices had weighed heavily on household spending and home building, which could have a prolonged effect on activity, he said.

In contrast, New Zealand's retailing and construction sectors were "star performers'' during the December quarter.

"We see scope for further growth over this year,'' Mr Gordon said.

In separate housing data last week, the Real Estate Institute noted that median house prices in 15 of 16 regions across the country had made gains compared with February last year, meaning New Zealand's market was not following in Australia's footsteps "in the short to medium term''.

Mr Gordon said while there was a "genuine slowdown'' in economic growth late last year, it was exacerbated by some temporary disruptions in the energy sector in the form of gas field disruptions and low hydro-lake levels

However, he maintained economic momentum would pick up this year as a result of increased Government spending, a strong pipeline of construction work and a rise in labour incomes.

He expected the current account deficit to widen to 3.9% of GDP.

"It is starting to reach levels that would be associated with a worsening in New Zealand's net overseas debt position, after a decade-long trend of improvement,'' he said.

Part of the deficit was because of commodity prices, dairy exports having fallen last year and oil imports rising during much of the year. However, both had turned around in recent months.

ANZ chief economist Sharon Zollner said she also expected the trade deficit to widen to 3.9% of GDP, quarter-on-quarter import values up by 3% and exports falling by around 1%.

She said economic momentum had softened, although domestic demand was being supported by elevated net migration inflows and healthy household incomes.

Those incomes were a result of the tight labour market, the Government's Family Package, low interest rates and a recent decline in oil prices.

simon.hartley@odt.co.nz


 

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