BNZ’s Head of Research Stephen Toplis is clearly not as optimistic as the Reserve Bank or the Government when it comes to NZ’s future growth – but why?

BNZ’s Head of Research Stephen Toplis is clearly not as optimistic as the Reserve Bank or the Government when it comes to NZ’s future growth – but why?

The Government’s fiscal firepower might not create the boom the Finance Minister and the Reserve Bank are hoping for, according to BNZ Head of Research Stephen Toplis.

He also says the Government is unlikely to be able to stick to its commitment of getting debt to below 20% of Gross Domestic Product (GDP).

The Reserve Bank’s August Monetary Policy Statement (MPS) said the Government’s fiscal stimulus package will be one of the biggest contributors to GDP growth over the coming years.  

The main part of that package is the Families Package, a policy which will leave households with an income of up to $55,000 a year $129 a week better off.

But speaking to, Toplis says some of the impacts of the fiscal stimulus package will be offset by different economic issues.

“The classic example of that is petrol prices; we’re seeing a substantial increase and people cannot afford those increases, so it’s eroding the gains.”

In other words, some of the gains those receiving the benefit of the Families Package would have received through the policy will be offset by other rising costs in the economy.

At the same time, Toplis says New Zealand’s economic growth won’t be as rosy as the Government or the Reserve Bank have forecast.

“We’re seeing migration fall away relatively aggressively and that’s slowing down the impetus from population growth,” he says.

As well as this, commodity prices have come off their peak, tourism growth is beginning to abate and the housing market is “basically stuck in the mud.”

This, along with the lesser impact of the fiscal stimulus, will drag on economic growth.

“In the first instance we know economic growth is going to be below what Treasury expected,” Toplis says.  

Earlier this month, Treasury warned that “growth over the coming fiscal year may be weaker-than-forecast in the Budget.”

The next day, Finance Minister Grant Robertson admitted that Treasury would likely have to downgrade its economic forecasts “a little bit” later this year.

“[The Reserve Bank] assumes the big fiscal stimulus we have seen, accompanied by relatively low-interest rates, would drive quite a big economic expansion next year.

“We’re just not quite as convinced that will happen.”

20% Core Crown net debt target ‘red herring’

Meanwhile, Toplis is not convinced the Government’s fiscal targets – such as getting Core Crown Debt down to 20% of GDP – will be met.

One of the main reasons for this is because of the lower GDP growth story – “softer growth, softer revenue.”

Essentially, if the economy is not growing as fast as the Government had expected, its tax take will be lower.

At the same time, Toplis is expecting the Government to come under a lot of pressure to increase its spending.

“If everyone is coming with their hands out saying, ‘we want more’ it’s going to be very, very difficult for the Government to completely resist that – particularly as we get closer and closer to another election cycle.”

This has already started to happen, with nurses and teacher strikes across the country.

But would it be that bad if the Government was not able to meet its debt targets?

“Frankly, none of it matters,” Toplis says.

“We talk about this 20% as if it’s sacrosanct. I don’t know of any economic research anywhere that says that 20% is the magical number that you should go for.”

In fact, both Moody’s and S&P have said it would not affect New Zealand’s credit rating if net core Crown debt was increased a few percentage points.

“The main reason for that is to show they’re being fiscally responsible. The number itself doesn’t matter – it’s a red herring.”

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A sound analysis from one who does not have a significant vested interest such as Robertson (and to some extent, Orr) in trying to talk the economy up.

Orr knows what is happening... But with financial stability being one of his goals he is just being very careful not to spook the herd and trigger a stampede.

He is doing a good job of trying to manage economic stability during unsteady times by keeping the OCR down (unusual situation of being lower than USA) which is putting downward pressure on the dollar to the advantage of exporters while trying to give stability in housing market. He is able to influence the housing market through LVRs if there is house price takeoff due to continuing low interest rates.
Robertson will be hoping that the market holds up during his "transition in the economy". We wait to see how successful his stimulus from working for families package will be.

On the contrary - Imo, It would be hard to find anyone with more of a vested interest than Mr Toplis.

Your opinion is noted but completely discounted based on your previous pro leftie posts. How about challenging the authors assumptions instead of trying to spin with the pro COL agenda?


You use the words left and/or leftie as if you think it is some sort of insult. It is no more so than right or rightie.

That petard you're stuffing gunpowder into for macawsley...looks awfully likely to blow up in your face if you're not careful.


I have news for you - our economy never was particularly hot, other than speculation in houses, both from both locals and foreigners, though the locals on the back of the foreigners. That and importing people at such an enormous rate that we have been.
Now we might actually do some work to build an economy, because what we were doing is totally unsustainable, all of it.


The immigration rate is a lot of the reason costs are rising. Why do we need a fuel tax? To pay for Auckland's transport infrastructure, which is woefully inadequate for the population. Why does everybody have their hands out for more money? Because their wages haven't kept up with the sky-rocketing cost of accommodation.

Yes and yes


Here is how you get your economy humming, you produce more things than the population needs and you import as little as possible, we are currently on the exact opposite side of that equation, even the stuff we think of as our own to a large extent is foreign controlled such as everything that comes under the Goodman Fielder umbrella, banks, meat processing, clothing - everything. And you don't have foreign landlords dipping their hands into the publics pockets for welfare in the form of accomodation top ups etc.
We will never get out from under like that.


On the money.

My comment was with regard to Mr Toplis not being a disinterested party .
Any evidence to challenge my assumption?
Your inane bitterness towards the new government, has not gone unnoticed, as such, your opinions are treated with the respect they deserve.

Interesting logic here. First, you make a claim about Mr Topliss having an extreme vested interest "It would be hard to find anyone with more of a vested interest than Mr Toplis", with zero facts or reasoning behind your statement, then request evidence to challenge your assumption. I think that you need to provide evidence to prove your assumption. Until then it is just an opinion without foundation.

Your description as to this opinion being an assumption is however entirely correct. What is the basis for your assumption?

You require evidence that a bank employee does not have a vested interest?
" bank employee" - axiomatic, I would have thought

An economist employed by a bank has a vested interest in understanding the economy and its future direction with the most accuracy. How does this infer that this bank economists analyses and conclusions are flawed due to being employed by a bank to help define future opportunities as well as risks?

I commented on his vested interest, and as the man is employed by a bank specifically to act in their interests.
It is axiomatic that his opinion is not independent.-simple as that .

So the typical "attack the messenger" instead of address the data. I'd far prefer discussing the relative merits of a particular position instead of attacking a possible bias. Show the bias via inappropriate conclusions based on flawed analysis. Even a stopped clock is right twice a day. Attack the data and the logical analyses. Dismissing a conclusion because the conclusion was from XXX is no better than a Trumpism.

Whine away all you like, it doesn't change the fact that Bank employees are not independent.


Yes, anger at house prices, but denial about the difficulty of changing the business model from shareholder dilution to profitability. I'm not sure any of the principal actors really have a plan.

For instance, Orr thinks he can reduce interest rates by 1% if GDP stays below 3% growth, denying the interesting effects that will have on the exchange rate, asset prices and foreign ownership of assets. Robertson naively assumes that his cash flow will not be unduly affected by the slowdown in immigration. Winston and Jones swagger around wasting money and spending up big, purely to boost their egos. The unions all see their chance and put their hands out. Taxes on petrol go up, hitting the lower paid hardest.

If we want to have a new business model based on profitable exports and reasonable wages and house prices we have to really want it, or we will fail to make the change. I don't see a champion for this cause as yet. Perhaps we need someone who can articulate our new priorities and identify the key principles we need to embrace. Who can show us that the sunlit uplands really are achievable and more than worth the trudge to get there.

For instance, the focus should be on export profitability, not on exports as a % of GDP.

Our current policy settings are far from appropriate to help us achieve higher economic complexity in our exports. There is little in the way of output complexity and productivity that can be achieved from our labour intensive dairy, meat and horticulture industries and the commoditized nature of our export goods. These can't be the mainstay of our economy if we were to aim for better wages and living standards for our people.

Around our skill profile, successive governments seem to be more interested in bringing more consumers into the economy from overseas for short-term boosts than improving the skill and expertise of our workforce for long-term growth and sustenance.

Actually, I think you may be overstating the problem there. We are good at exporting, despite the headwinds thrown in the way. So, take away the headwinds and our export businesses become more profitable. After a while they will start to build up capital from profits and thus be able to expand in a sustainable manner. It's a slower process than borrowing or selling your equity, but more likely to endure. We have a good business, just poor policy and no obvious leader in sight.

Robertson’s cash flow will not be affected by reduced immigration as they’ll ratchet up income tax after the next election.

Not to mention a whole suite of other new taxes or “levies” as they now call them.

Toplis is quite correct. The next stage of labour government will be massive tax rises to pay for all the wage increases and promises which are based on wildly optimistic growth projections

The rather optimistic growth projections were stupidly high in the Labour post PREFU budget plans, with the following four years GDP growth assumed to be 4.5% YoY gains on average. These unsupportable estimates have slowly been reduced as reality has intruded. Reality is that their GDP growth assumptions were off by about a factor of two, which will result in a rather large deficit in the government income (aka taxes).

In rejecting Joyce's assertions of a gap between expenditure and funding in coalition budgets, a wide range of economists, including darling of the left Ganesh Nana, firmly argued that Robertsons growth projections were not 'rather optimistic'.

Confession time approaches, fiscal hole deniers. Start practising your mea culpas. We commentators will be merciful.

I recommend reading the numbers for yourself, look here: and download Labours post PREFUs fiscal plan. Go to page 17, and look at the GDP numbers shown. Note that they carefully don't show the YoY growth explicitly, one has to go to the trouble to calculate this. Yes, there were quite a few that agreed that the numbers as presented added up correctly. This is misdirection, as the numbers had certain assumptions embedded in them, such as that 2018/2019 fiscal year would have a GDP growth of 4.93%. Assuming that the GDP growth assumption was accurate, the numbers added up. Well... the actual GDP growth is looking to be about half that, if not less. With the wildly optimistic GDP growth assumption invalidated, the numbers do not add up anymore. This isn't a partisan observation, it is simply maths.

Remember when Joyce suggested a fiscal hole the laughter from all the media organisations with one jumping the shark saying Joyce didn’t pass all eight economics papers at Uni.

Is that the same Joyce budget gap between viable public services and the screwed-down, unsustainable heap that National hid under the guise of "look we made a surplus"?

Sounds more like a man who knew exactly where the skeletons were and blamed Labour for finding them.

There was no Labour finding the budget gap, but instead Labour perpetuating a similar "hide the badness", just under a different shell. One should look to see past the partisan blinders. I have some serious issues with some of Nationals positions. Similarly, I have some serious issues with some of Labours positions. Above all, I value fiscal responsibility. I really do not like it when a party "cooks the books" via flawed assumptions, or via flawed policies. Campaigning on stopping the house price increases of the prior Labour government, then following with the same policies, National really effed up there. Embracing immigration, another effin mistake. Labour hasn't addressed any of the fundamental causes of house inflation for the nation, although they may have now addressed some issues for a few isolated locations (central Auckland, and a couple highly elevated tourist destinations). I would be happier if there were fewer loopholes. I also would be FAR happier if they instituted a capital gains tax that had zero loopholes. Note, not a capital tax but a capital gains tax. Taxing capital will have unintended consequences...

Larry76. Going with your theme then, Labour had 9 years to fully identify that underfunding so plenty of time to get the actual dollars required to address the shortfall, correct.

Most could see the coming economic slowdown, even Jacinda's BFF Peters. The impacts of the Coalition's (ahem) crackdown on migration would have been meticulously plotted, Jacinda's 'this one's on me' handout to students and other expansions of welfare were no doubt carefully calculated by Labour. So no surprises in any of this.

Robbo intimately understood the numbers and made much of the alleged deficit funding of the nats so he can't claim underfunding by the previous government as a surprise. Even with his fancy off balance sheet borrowing footwork and the higher taxes middle NZ pays under coalition rule, there was always not going to be enough revenue.

Pocket Aces agree with your views, and wait until the TWG takes up the Productivity Commission's call for Carbon Taxes - "The Productivity Commission says the price of carbon in New Zealand needs to increase 10 to 12-fold for us to reach net-zero emissions." from this morning's 90 Seconds. Watch the economy go backwards then!

Except I don't actually think that growth is something that is sustainable around the world. I actually believe we have to find different ways to operate in order to make sure we have a world we, and other species, can live on. At the moment it is just growth, growth, growth, all I was doing was stating how you get it.

Agreed. I've argued the finite world perspective before. But I feel that too many people in power are in denial. they cannot step outside the conventional economic wisdom re growth. Sad really - we will be the authors of our own demise.

Even if the entire developed world stopped growing and went into reverse the developing world is so far behind that it is impossible to stop them growing - think of hospitals and roads and substitutes for cooking on open fires, etc. They also well outnumber the OECD countries. So growth and destruction of resources will continue. Which is not to say we should do nothing - just be realistic about outcomes.

Obviously in NZs case growth comes from its strong connections with China
A country of nearly 1.4 Billion people China can take everything agriculturally NZ produces & build NZs much needed infrastructure for this century
High speed rail from top to bottom of the country & a new Auckland harbour bridge with better freeways
Where’s NZs strategic plan ? It has only piecemeal plans
China is the key to NZs future. The USA unable to cement its TPP former commitment.
The USA has a lot of cleanup to do apologizing for its disastrous Trump farce

ANZ change call on RBNZ

This weeks retail sales data will confirm which direction NZ economy heading


I wonder if Northern Lights has been rounded up by order of the Chinese Politburo? It's not like him to disappear without a trace! What terrible fate awaits those who recommended and then sold en masse the idea of a 'rittle gambrol in the Aurkrand ploperty market.'

So NZ Economy is not a Rock Star economy after all, it's more like some weirdo dressed up as Bob Dylan and we all fell for it!

More like milli vannilli....lipsynchers pretending to be an economy?

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