Lift in NZ’s economic-rankings likely

Report points to ‘risks’ and says growth may slow

New Zealand is forecast to jump one place in the world's economic rankings next year, according to a new global report. The 2018 World Economic League Table released yesterday, predicts New Zealand's Gross Domestic Product (GDP) will become the 51st largest in the world, up from 52nd.

Economic growth is expected to have expanded by 3.5 per cent by the end of this year and 3 per cent in 2018.

This year's annual growth was driven by construction activity, a growing tourism industry and net inward migration, as well as the continuation of expansionary monetary policy, the report said.

Published by the Centre for Economics and Business Research (CEBR), it predicts India will for the first time leapfrog Britain and France to become the world's fifth largest economy next year. China is forecast to overtake the United States as having the highest GDP by 2032.

The report says New Zealand faces “downside risks”, and growth is projected to slow somewhat in the coming years.

“The election of a new Government adds uncertainty to New Zea-

The policy mandate of the Reserve Bank of New Zealand is now to target employment and inflation, which is likely to lead to an increase in inflation in the short to medium term. Centre for Economics and Business Research

land's economic outlook. The policy mandate of the Reserve Bank of New Zealand is now to target employment and inflation, which is likely to lead to an increase in inflation in the short to medium term.”

A prolonged period of low interest rates and record immigration had led to a dramatic rise in house prices and high household debt that posed a risk to the stability of the financial system.

“The new Government has pledged to address this problem by banning property sales to foreigners, taxing speculative property buyers and increasing the housing supply. While these policies may alleviate the problem of unaffordable housing, they could also trigger a marked slowdown in the housing market, which could suppress economic growth.”

As New Zealand's top export destination, the continued slowdown in Chinese growth would also have an adverse effect on New Zealand's export sectors.

Australia would also be hit by a Chinese slowdown, causing further knock-on consequences for the New Zealand economy.

“Another challenge is low productivity, which lags behind other OECD countries including Australia. This is partly due to a high rate of corporate tax that reduces capital investment as well as relatively low levels of research and development spending,” the report says.

On the upside, good public infrastructure would continue to facilitate growth, with a comprehensive public transport system and substantial investments in renewable energy.

“The country has an ageing population like most of the developed world, but with a debt-to-GDP ratio of just 26 per cent it has plenty of room to deal with any increase in expenditure that may stem from this.”