Economy still rocking
The man who coined the phrase ‘rock star’ economy is still bullish about us, Hamish Rutherford reports.
Adecade on from the global financial crisis, there are plenty of experts issuing warnings about the economy, some of them grim, both here and overseas.
On Wednesday William White, the former chief economist of the Bank of International Settlements, warned the Davos summit that financial markets were stretched as they were just before the start of the Global Financial Crisis ‘‘but the lesson has somehow been forgotten’’.
Closer to home, Westpac’s New Zealand economics team is warning house prices will fall gradually for the next four years, sapping consumer confidence at a time when employers may pare back hiring amid uncertainty.
ANZ, New Zealand’s largest lender, has warned the country faces a ‘‘growth wobble’’.
But the man who famously dubbed New Zealand the ‘‘rockstar economy’’ is as upbeat as ever, predicting that a global economy in the best health in years will see both New Zealand and Australia carried to stronger growth.
‘‘We certainly are expecting to see that the conditions will be sustained well into 2018 and 2019. Global growth is lifting in a very synchronised fashion, it’s not just in one area,’’ Paul Bloxham, HSBC’s chief economist for Australia and New Zealand said.
US growth was strong and Europe, which improved in 2017, appeared to be set to continue to expand this year, helping to boost global trade, and with it commodity prices, Bloxham said.
The momentum was lifting sentiment, boosting business investment.
‘‘It all seems to have a fair bit of momentum. It’s been 10 years since the global financial crisis and so it’s taken a long time to recover, but we seem to be at a point where that drag has worked its way through.’’
Both New Zealand and Australia were impacted, being ‘‘global surfers on a global wave of growth.’’
In New Zealand, business confidence has plunged since the election across a number of surveys, and while NZIER said its longrunning quarterly survey of business opinion tended to show a bias against new Government, Westpac and ANZ have both warned weak sentiment could dent investment and growth.
But Bloxham has predicted that the loss of confidence is likely to be largely down to concerns about a lack of labour supply. Demand, which has been strong for business, is likely to be boosted by a fiscal ‘‘party’’ as the new Labourled government spends more.
‘‘That, combined with continued growth momentum, means that demand is set to remain strong in 2018.’’
His rosy picture of the economy comes with a possible downside for borrowers, with HSBC predicting the Reserve Bank could raise interest rates as soon as July.
Bloxham’s comments did, however, come before Thursday’s news of unexpectedly weak inflation at the end of 2017, which prompted ANZ to push back its forecast for interest rate rises into 2019.
Above all, Bloxham maintained that New Zealand remained a ‘‘rock star’’ in economic terms, saying if anything the case had strengthened. Official revisions late last year meant the economy was estimated to have grown around 3.7 per cent annually between 2014 and 2016.
‘‘Growth has run ... well above anyone’s estimate of trend, he said.
‘‘If you compare it to Australia, Australia’s had a good growth performance as well...but we’ve had Budget deficits for almost 10 years in Australia.’’ The federal government there is not expected to post a surplus until some time after 2020.
''We certainly are expecting to see that the conditions will be sustained well into 2018 and 2019.''