Optimism for NZ to ride out volatility
New Zealand’s economy is not headed for recession, ASB chief economist Nick Tuffley says.
For all the gloom-laden predictions overseas which have prompted financial market volatility, this country’s economy is not going to sink, Tuffley said.
‘‘New Zealand is going to be comfortably holding its head above water ... but there is obviously a lot of nervousness about that global front and you can see why with all the trade shenanigans around.’’
ASB’s latest forecast predicts the economy will grow about 2.5 per cent per year, a figure close to Treasury and Reserve Bank forecasts but ahead of other forecasters who are picking growth closer to 2 per cent or lower.
‘‘We do put faith in those parts of the economy that are stimulating the economy at the moment. Provincial areas are doing really well out of high export prices, and you have got to remember we have got a tailwind from our population growth, which is about 2 per cent.’’
There were more than a few headwinds, such as lacklustre business confidence which was hampering investment and a lingering uncertainty about government policy, while the external threats such as the US-China trade dispute, Brexit and weak global prospects pointed to the slowest growth since the global financial crisis.
The expectation is that the Reserve Bank will cut its cash rate by a further quarter percentage point to 0.75 per cent in November to further support activity.
Tuffley said that should help to lift activity in the housing market and stimulate consumers to spend more. The Government should stand by and be ready to support activity if the global downturn turned bad.
‘‘The quick way to do that is boosted social welfare benefits or tax cuts to get money into the hands of people who will spend it. The key thing is let’s not make the Chinese mistake and just spend money on anything to get some growth. We do want to see it well targeted and quality spending.’’ – RNZ