Winds of economic change blowing

Economic growth is slowing. Immigration has peaked. The housing market is cooling and prices may drop. The construction boom is over. Consumer spending is slowing down. Bank economists are noticing and predicting changes in the economy.

Only some of the changing fortunes can be attributed to shifts in policy, but the natural tendency to ‘‘blame it on the Government’’ may reverse the recent opinion poll uptick in support for Jacinda Ardern’s Labour-led coalition.

And, after campaigning on its track record and a promise of economic stability, a numerically strong, experienced and aggressive National Party opposition will soon have plenty of ammunition for the trench warfare that is Question Time in Parliament.

But the winds of change began blowing before the election. An ANZ economists’ report in September noted that the three big drivers of the New Zealand economy – immigration, tourism and construction – had peaked or were peaking. Even before the change in government, the previously so-called rockstar economy was ‘‘running below trend’’, their reports said.

Now, a Westpac bank report asserts that there are indeed ‘‘changes in the air’’, and across varied indicators – immigration, house prices, consumer spending, the construction sector.

Building activity fell in the first half of this year, and the South Island’s quake rebuild is long past its peak. Property developers have had problems getting finance, and the construction industry has hit ‘‘capacity constraints’’ – in other words, there are not enough builders.

Labour and New Zealand First campaigned on lower immigration, but the shorter-term arrivals who boosted the net migration inflow over recent years had already started leaving.

Net migration is now expected to fall sharply and population growth, currently above 2 per cent per year, is likely to fall to under 1 per cent in a couple of years.

Meanwhile, even before the Government’s curbs on foreign ownership, other pressures are bearing on house prices, not least the rise of mortgage rates from a low in late 2016. Westpac has even reversed its previous forecasts for where house prices will go next year – from a 2 per cent increase to a 2 per cent decline. It says there could be a 5 per cent decline over the next four years.

Consumer spending has also been checked. This is especially true for durable household goods – if fewer people are buying houses, they don’t need so many fridges and dishwashers to go in them.

There are plenty of changes coming that can be directly attributed to the new Government’s policies. Cancelling National’s tax cuts is likely to chop back the rise in gross domestic product – the primary measure of economic growth. More cash being handed out through higher student allowances and increases to Working for Families will not offset that.

Westpac is also signalling $7 billion of extra Government borrowing over the next four years, providing a ‘‘classic borrow-and-spend fiscal stimulus’’ which will support GDP, but is likely to crowd out private sector spending – for instance when hiring more public servants creates labour shortages elsewhere.

A recent Roy Morgan poll suggested that two-thirds of New Zealanders felt the country is heading in the right direction. People might change their minds as economic conditions shift, but they should be aware that not everything can be blamed on the new government.