NZ economic growth hits five-year low
NEW ZEALAND’S economic growth slowed to a five-year low in the 12 months to June, official data released yesterday showed, fuelling expectations further interest rate cuts are imminent.
Statistics New Zealand said the economy expanded 0.5 per cent in the April-June quarter, slightly below market forecasts, as mining and manufacturing activity weakened.
It took annual growth to 2.1 per cent, the lowest recorded since late 2013. Economists said the weak figures increased the likelihood the central bank will follow up a surprise interest rate cut last month with further reductions.
The Reserve Bank of New Zealand slashed its base rate 0.5 percentage points to a record low of 1.0 per cent in August, saying it wanted to stimulate the economy in a bid to meet employment and inflation targets.
Kiwibank chief economist Jarrod Kerr said NZ was struggling for growth amid weak business and household confidence, combined with heightened uncertainty offshore.
He predicted the central bank would leave rates on hold next week but cut them by 25 basis points at its November meeting, with a similar reduction possible in early 2020.
However, Kerr doubted the bank could kick-start the economy by itself, saying the government needed to boost spending to provide “fiscal caffeination”.
“What’s needed, is a strong fiscal policy,” he said. “Monetary policy is proving ineffective without fiscal support.”