- Shamubeel Eaqub, NZIEr economist
The New Zealand economy continues to grow, but the growth pace is moderating, the New Zealand of Economic Research said. The nation's economy is running at a solid pace, generating employment and income growth as well as little inflationary pressures. However, there are two key risks for the economy: a global slowdown and a bursting of the overvalued Auckland housing market bubble. The menace included the potential for weaker global economic growth to weigh down on commodity prices, exports, and the provincial economy. Japan is in recession and Europe is struggling to recover, with even Germany running out of momentum. So far the think tank does not see any catalysts for the Reserve Bank of New Zealand to raise its official interest rates until 2016.
Annual economic growth is expected to average 2.5% over the next five years. Dramatic drops in dairy and log prices, the country's largest- and third-largest exports, have sapped expectations for economic growth, while the steam may be coming out of the Auckland housing market. However, on a positive side, low interest rates are seen to continue to bolster growth, with low inflation keeping the RBNZ in a wait-and-see mode. GDP growth eased to 0.7% in the second three-month period, following three straight quarters of the 1% expansion.
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