The stars may be in alignment for the New Zealand economy for now but Westpac acting chief economist Michael Gordon does not expect the situation to persist indefinitely.
The pace of population growth would eventually slow, additional household debt taken on in recent years would need to be repaid, the wind-down of the Canterbury rebuild would reduce construction activity and house prices would not keep heading north at their current eye-watering pace forever.
With credit conditions getting tighter, retail interest rates were likely to head higher soon, even if the Reserve Bank left the official cash rate unchanged for an extended period, he said.
''All this means we continue to expect the economy to slow in the latter part of this decade. GDP growth is forecast to slow from 3.4% this year to below 2% by the end of 2019.''
The creditable performance of the New Zealand economy was not new news, Mr Gordon said. It had been a feature of recent Westpac Economic Overviews. However, a new facet of the story had been the broadening nature of the growth.
While familiar engines of growth, including construction and tourism, were continuing to chug along, in recent months there had been a broader improvement across sectors.
Also, there had been a notable improvement in the dairy sector, which had been expected to remain a drag on the economy, he said.
Dairy prices had improved substantially in recent months and instead of facing a third consecutive season of negative cash flows, most farmers would be headed ''firmly'' back into black this season.
That did not mean a big rebound in farm-related investment and spending. Most farmers would have taken on additional debt in recent years to carry them through the period of low prices and the debt would need to be repaid.
Any additional spending in the near-term was likely to focus on maintenance and operational spending deferred when times were tough.
Some farmers could be looking at additional spending on feed and fertiliser to help lift production to take advantage of higher prices.
''While we're certainly not back to the heady days of an $8 plus payout for the sector, the outlook is certainly more optimistic than we feared last quarter.''
In contrast to expectations, annual net migration had continued its record-breaking run, rising to a new all-time high of nearly 70,000 in September, Mr Gordon said.
Although student arrivals had continued to track lower, reflecting tighter enforcement of entry requirements, it had been partially offset by ongoing growth in people arriving on work visas.
Policy played an important role when it came to arrivals of migrants on the various visa categories and the Government had recently announced measures aimed at reducing those inflows.
Much of the swing in net migration related to transtasman migration of both Australians and New Zealanders, for most of whom there were no significant restrictions on their ability to live and work in either country.
For those people, economic incentives dictated flows. For most, that boiled down to labour market opportunities.
The regional location of the Kaikoura earthquakes meant there was not the same scale of damage wrought by the Canterbury quakes, Mr Gordon said.
There still had been major damage and significant disruption, especially to infrastructure such as roading and rail in the affected areas.
''It's too early yet to judge the cost of disruption and recovery, which will, in part, reflect policy choices by the Government.''
The forecasts in the Overview did not make any explicit allowance for the economic impact of those quakes, although Westpac did not expect it to become a dominant theme in the same way Canterbury did, he said.
Aside from earthquake reconstruction and the Auckland housing shortage, the other factor supporting residential construction nationwide had been low interest rates and buoyant house prices.
Auckland prices continued to command a large premium compared to those in other parts of the country but the region was no longer leading the pack when it came to the pace of house price inflation.
Instead, house prices had been growing faster in property hotspots such as Waikato, Bay of Plenty and even Wellington, Mr Gordon said.
One notable beneficiary of the stronger domestic economy had been the Government accounts. Tax revenue had been running well ahead of forecasts.
Looking ahead, ongoing growth in household spending and more tourist arrivals should boost GST revenue, while the improving labour market pointed to higher PAYE. Expanding business activity would contribute to stronger corporate tax.
''An improved tax takes leaves the Government well positioned to deal with emerging demands on the public purse.
''Although the costs associated with the recent earthquake are uncertain, the damage to infrastructure means much of the cost will fall to the Government.''
In addition, stronger than expected population growth might require the Government to increase spending in sectors such as health, education and superannuation, as was seen with the additional $1 billion spending announced earlier this year, Mr Gordon said.
