Seasonally adjusted merchandise exports
Source: Statistics NZ, ANZ Research
However, the abrupt moderation in the housing market suggests the economy is about to screech to a halt.
“[NZ] merchandise exports in December were spectacular.”
But this time is, in fact, different – the slowdown has been caused by Reserve Bank macro-prudential policy restricting credit availability, not higher interest rates.
Real GDP growth and house price inflation
Source: Statistics NZ, REINZ, ANZ Research
The fact consumer confidence is holding up well suggests housing won’t be quite the headwind for growth the above chart would suggest.
We’re also discounting the fall in the activity outlook in our business confidence survey to some extent for now.
Anecdote suggests it might continue to bounce back as uncertainty related to the unexpected election result wanes. We are assuming any near-term growth wobble won’t be long-lasting.
ANZ Business Outlook Own Activity Index & ANZ Roy Morgan Consumer Confidence
Source: ANZ, Roy Morgan
Nonetheless, with net migration looking like it has topped out, labour force participation at a record high, and workers already working long hours, New Zealand will need a rapid productivity turnaround if recent growth rates are to be maintained.
Growth at par would actually be a pretty solid outcome given we are nine years into an economic expansion with signs of capacity pressure evident, particularly in the construction sector but also more broadly.
Fortunately for heavily indebted households, the feed-through into inflation seems to have broken down, so we see the Reserve Bank on hold until the second half of next year.
Non-tradable inflation versus capacity measures
Source: NZIER, Statistics NZ, ANZ Research
Sharon Zollner is Chief Economist at ANZ NZ