Predictions for

The economic growth of 2020 could be a fizzer, affecting property prices, Kiwisaver and household debt, writes Diana Clement

Hello 2020. What are you likely to bring to our back pockets? Will there be a house price crash? Another global meltdown? Will your KiwiSaver tank? Or all manner of financial doom and gloom?

Could the new decade herald better things financially? More people earning a living wage, better tax breaks for KiwiSaver, lower loan to value ratios on homes, better house prices? Who knows? Being aware of what’s on the horizon helps as well if you want to make the most of your money.

Some predictions are easy. At some point during the year, you’ll receive a bill you weren’t expecting. And unless you’re superhuman some of your income will be misspent.

The bigger picture is altogether more difficult. Economists are paid to crystal ball gaze and take a crack at predicting whether 2020 will be boom, bust or somewhere in the middle. Most get the general direction right and their employers can then plan based on those predictions.

When you ask economists for their forecasts for the year, one of the first words that comes out of their mouths is the big R word: recession. That’s no exception for ANZ Bank’s chief economist Sharon Zollner. Not that she’s predicting one. Nor will she rule the possibility out as they do tend to come along every 10 years or so, sparked by things we can’t predict.

Even if it were to happen, we’re not likely to fall as hard as we did in 2008, thanks to the rule of economics that “the harder you party the bigger the hangover”, says Zollner. “Things haven’t become silly. That’s a win. But household debt is still very high,” she says, “and that makes us less resilient.”

Whether or not we head into recession we should still expect a volatile year, says Jarrod Kerr, chief economist at Kiwibank, although he predicts we will end up in a better place than we started.

Economic growth, he says, is likely to be anything from a disappointing 2 per cent to a disappointing 2.5 per cent when the final figures come out for 2019. Even if the economy picked up to 3 per cent over the next year or so, as he forecasts, that’s hardly anything to do victory laps over.

Keeping many economists, politicians, financiers and others on tenterhooks is the tinder-dry relationship between the US and China. It wouldn’t take much to trigger a global crisis with ramifications for little ole New Zealand.

One piece of good news is the two superpowers are likely to sign the first phase of a much-needed trade agreement, says Kerr. “But we will realise they haven’t signed a proper trade agreement at all and there will be facing off,” he predicts. “This unwinding of globalisation is scary for small economies like ours,” says Kerr.

It’s not just the US and China to worry about. Some of the largest markets that affect our economy don’t look altogether too healthy either. “Brexit is still there and unresolved, and Europe is still a basket case and will be for the rest of our lives. If you are using that as your canvas to paint your picture you have a few holes in it already.”

On the positive side, says Kerr,

New Zealand has been getting good prices for commodities overseas. But don’t get complacent. There are risks on this front, however, adds Zollner. “While the returns on sheep and beef are spectacular and dairy pretty darned good there is a mood of uncertainty, thanks to those unusually high prices when the countries we export to aren’t actually doing that well economically. And as always, exporters are vulnerable to what happens to the New Zealand dollar, though it’s been behaving itself pretty well this year. ”

In some countries governments can’t spend to stimulate their economies because their debt is already so high, says Zollner. That’s