NZ economy growing broadly around trend - ANZ

Analysts at ANZ suggest that their forecasts depict that NZ economy is likely to grow broadly around trend for the next couple of years, with the unemployment rate set to remain low.

Key Quotes

“It is hardly a negative story. We see wage growth gradually lifting off lows, corresponding with a modest broadening in domestic inflation pressures in time. That lift should eventually see the RBNZ join other central banks in removing monetary policy stimulus. However, we feel strongly that it will be late to that party, with the first hike not until the second half of 2019.”

“primary sector outlook

Export prices are holding near cycle highs. Apart from lifting dairy and beef supply, there is little on the horizon to suggest a change in either direction. The main risk appears to be an escalation in global trade protectionism, but it’s unclear exactly how this may play out for New Zealand exports.”

“Financial markets outlook

While funding market pressures both here and abroad are creating some angst, we don’t believe local pressures will escalate. We see scope for local short-end rates to fall modestly in the near term, but ultimately remain anchored by RBNZ policy inaction. Local long-end rates should rise in line with global moves, seeing the curve steepen. However, we see further scope for further local outperformance, with NZ-US 10-year spreads to push more clearly negative. We expect downward pressure on the NZD over the course of 2018, especially against G4 currencies. NZD/AUD has threatened to break higher, but we see it remaining range-bound.”