- Stephen Toplis, head of research at Bank of New Zealand Ltd.
New Zealand's economy expanded at a faster than expected pace in the third quarter as low interest rates and record immigration boosted consumption, while primary-industry production rose to a 15-year high. Gross domestic product rose 1% in the July-September period, up from the 0.7% growth in the preceding quarter, according to Statistics New Zealand. Analysts, however, had expected a slightly weaker growth of 0.7%, whereas the Reserve Bank of New Zealand had forecasted a 0.9% increase in economic output. Measured on an annual basis, the South Pacific nation's economy expanded 3.2%. Primary-industry activity soared 5.8% over the three months through September, driven by agriculture and mining production which rose 4.7% and 8% respectively over the third quarter. Manufacturing also contributed to the solid growth, growing 2% over the quarter. The service industries, however, were mixed with increases in telecommunications and retail being offset by declines in transport and business services. Last week the RBNZ decided to keep rates unchanged and pared its outlook for future rate increases, saying that the growth could be sustained with a more gradual lift in interest rates, due to soft inflation pressure. The central bank indicated that it intends to raise the Official Cash Rate three more times over the next two years by 25 basis points in each case. The RBNZ has already hiked the OCR by 1 percentage point since March.
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