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ANZ economists say consumer spending will need to be restrained if the large-scale house building planned is not to result in inflation

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ANZ economists say consumer spending will need to be restrained if the large-scale house building planned is not to result in inflation
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ANZ economists say consumer spending will need to be restrained if the large-scale house building planned is not to result in inflation

Growth in consumer spending will need to be restrained if the large-scale house building in New Zealand planned for the next few years is not to result in inflation, ANZ economists say.

In their weekly "market focus" the economists comment on the "accord" between the Government and the Auckland Council announced on Friday, which is targeting 39,000 new houses in Auckland over the next three years. So, far the accord and surrounding announcements have been short on detail of how the 39,000 extra homes will be achieved.

ANZ's economists say they "presume" there must be some plan as to how the 39,000 houses will appear "without the construction sector bursting at the seams resource-wise".

"We’ll be eying the Budget [on Thursday] for skills-based initiatives in the construction arena," the economists say.

"A supply-side response will certainly help alleviate excess pricing pressure in the Auckland corridor (suppressing inflation), but we’re equally mindful that 39,000 units is a lot of growth."

The economists say that assuming a gradual ramp-up in momentum to say 17,000 units in year 3 of the Auckland accord, "we’re talking incremental impetus to [economic] growth of around 0.5-0.8 percentage points per year (0.8 in year one and 0.5 percentage points or so the following two years). Add this to Christchurch’s residential construction – which will dominate the rebuild effort for the next 3 years – and there’s a lot of growth in the pipeline."

The ANZ says the "story" goes beyond the 39,000 units, however.

"They are hoping to build 13,000 per year for the next 30 years. Add 7,000 units per year as part of Christchurch’s [rebuild] and you have base demand of say 20,000 units. Building consents have averaged a bit over 21,000 per year and the “peak” has been 33,000. Two regions alone now have pipelines that are more than 60% of the peak!

"One wonders where the resources will miraculously appear from."

The economists say that in any case, policymakers are trying to hit a moving target, with the Auckland housing shortage in three years time likely to be 40,000 plus, versus the current 30,000.

"Consumption growth will need to be very restrained over the coming years if a residential rebuild is to be accommodated without the inflation genie being released and the external accounts deteriorating substantially."

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4 Comments

The desperate need to spin inflation concerns continues, despite abjectly low inflation outcomes. Wouldn't the smallest official rate increase dampen inflation expectations?

 

One wonders if borrowers are struggling to repay their obligations when annual wage rate growth continues to ease

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Yes, but...  I think what may be happening is a very slow retasking from an excess of political analysts and lawyers which the Labour years encouraged; to an excess of trades people and resource consent managers under National. Once building really kicks into gear we should have all the inflation anyone would wish for. Unless something comes unglued somewhere first.

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ANZ know where the money is being made, come on guys get with it

 

Australia & New Zealand Bank recommended investors to buy July call options in raw sugar, saying that the boost to prices of the sweetener from ethanol was poised to "gain traction", thanks to demand for the biofuel within Brazil itself and or exports to the US.

 

http://www.agrimoney.com/news/sugar-prices-to-gain-traction-thanks-to-ethanol--5821.html

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"ANZ economists say consumer spending will need to be restrained if the large-scale house building planned is not to result in inflation.

Growth in consumer spending will need to be restrained if the large-scale house building in New Zealand planned for the next few years is not to result in inflation, ANZ economists say."

Seems a bit repetitive... Or is it just spin...?

HGW

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