The New Zealand economy remains a solid performer. Since the last New Zealand Insights we have seen an upward review to New Zealand’s recent historical growth track, followed by an upward revision of labour productivity performance, though we remain concerned about the recent weakness in business confidence. While retail spending has been strong in recent years, it’s the Government that is going to provide a significant boost to growth later in the year as government spending picks up. The global growth environment is the biggest tailwind for the New Zealand economy, though there are emerging headwinds from a possible trade war with the US. Overall CPI inflation remains subdued, but with solid above-potential growth ahead, further tightening in the labour market will see wage pressure intensify.
Conditions now right for a pick-up in productivity
Lower business confidence remains a concern
Fiscal policy will provide significant boost to growth
Retail spending still strong, but likely to slow
Global economic growth in a strong synchronised upswing
Core inflation remains subdued, monetary policy on hold
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