NZ economic growth slows amid confidence slump

WELLINGTON: New Zealand’s economic growth slowed in the first quarter as uncertainty over government policies weighed on business and consumer confidence, damping investment and spending.

Gross domestic product gained 0.5% from the fourth quarter, when it rose 0.6%, Statistics New Zealand said in Wellington.

From a year earlier, the economy expanded 2.7%, down from 2.9% in the previous three-month period. Yesterday’s data matched economists’ median forecasts in a Bloomberg survey.

The economy has expanded for nine consecutive years, but the pace of growth has declined as immigration slows and construc- tion stalls. While the new Labour-led government has unveiled a welfare package that will boost household incomes from July 1, businesses started the year with few details on its key plans.

That kept confidence gauges near their weakest since the global financial crisis.

“We have been anticipating a period of subdued growth through the first half of this year, reflecting businesses’ uncertainty about the new government’s policies,” said Michael Gordon, senior economist at Westpac Banking Corp in Auckland. “However, increased fiscal spending should provide a boost to activity from the second half of this year onwards.”

The New Zealand dollar was little changed after the GDP report, buying 68.63 US cents at 11:21 am in Wellington.

Slower growth adds to signs that inflation will remain subdued and the central bank won’t rush to raise interest rates from a record low. The Reserve Bank, which forecast 0.7% growth for the first quarter, signaled in May it would keep the official cash rate at 1.75% until late-2019. Traders see just a 12% chance of a hike before the end of this year.

Yesterday’s report “provides further support for our view that GDP growth will slow from 2.9% last year to 2.5% this year and to 2% next year,” said Paul Dales, chief Australia and New Zealand economist at Capital Economics in Sydney.