The New Zealand economy is in the more challenging phase of the economic cycle. The easier growth that comes as spare capacity is gradually absorbed has turned to the hard grind of capacity constrained growth. Business confidence has continued to slide, but strong population growth and terms of trade at near record highs provide key supports for growth. The good news is that interest rates are low, and conditions are right for higher investment and a cyclical recovery in productivity. At the same time, the monetary policy outlook is uncertain, and the New Zealand dollar has been on a weakening trajectory.
Growth has slowed but not collapsing in a hole
Expect growth to hold up in the near term
Weakness in business confidence can’t be dismissed
Inflation is moving higher
Monetary policy outlook is uncertain
New Zealand dollar may see further weakness
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