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Westpac picks NZ GDP to grow 4.2% in 2011 on back of exports, trading partner strength

Westpac picks NZ GDP to grow 4.2% in 2011 on back of exports, trading partner strength

New Zealand's economy will grow by 4.2% in the 2011, led by an export sector bouyed by growth of our key trading partners, Westpac economists said.

Growth would be up from 2% in 2010, but then ease back to around 3% in 2012, they said.

"A combination of drought, weak house prices, soft income growth, and data measurement issues have kept economic activity subdued so far this year,” Westpac chief economist Brendan O’Donovan said.

"However, the outlook for 2011 is looking much healthier, and we believe it would be a mistake to extrapolate the recent weakness into 2011,” he said.

The major factors underpinning growth next year would be: ongoing global growth; strong income growth via an improving labour market and a rising terms of trade; continued monetary and fiscal stimulus; population growth; and, a better growing season in the agricultural sector.

Westpac said it expected the export sector would remain at the forefront of New Zealand’s recovery, with key trading partners forecast to grow at 4.4% pace in 2010, and 3.6% in 2011.

Continued strength in emerging markets was critical to the Westpac's outlook, it said, as it expected persistent strong demand from countries like China and India to support current high commodity prices and importantly the terms of trade. 

“The terms of trade reflect NZ’s international purchasing power, so an increase means we can consume more without producing more,” O’Donovan said.

“The 13% surge in the terms of trade this year unambiguously leaves NZ better off. We expect that income boost to eventually flow into greater spending and investment activity,” he said.

Westpac said the skew of global growth toward developing economies and elevated commodity prices would likely keep the NZD at a high level.

(Udpate adds comments on trading partners, NZ$, link to document)

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55 Comments

hahahaha....

 

me too....haaaaaaaaahahaha

Ha - ha - ha - ha - ha.......

How convenient Brendan doesn't mention the boost to the GDP figures that rebuilding Christchurch will be. A net cost to the country; but, hey the GDP figure will look better!

Yes, how convenient that he didn't say something like: "However, the 7.1 magnitude earthquake on September 4, while devastating in the near term, has essentially filled the growth hole that was beginning to emerge in the construction sector. The building and infrastructure cost of the earthquake has been estimated at around $4bn or 2.1% of national GDP. Previous work on the potential economic impact of a major earthquake in Wellington put the cost of interruption to business at around 15% of the capital loss. So if the final bill does come in around $4bn (ignoring damage to inventories) that would equate to a short term income loss of $600mn (or 0.3% of GDP). Over the medium term, the local and national economies are likely to get a substantial boost from reconstruction activity – and one that will be much larger than the initial income loss. Our forecasts assume around $2bn of rebuilding in the residential space, with a further $2bn going toward non-residential buildings, and infrastructure. We also assume that the reconstruction work will extend outside our forecast horizon. However, the big boost to investment and hence GDP growth will come in the December 2010 and March 2011 quarters as construction activity steps up to a higher level. It is important to remember that the national balance sheet has been weakened by this event. A substantial boost to GDP is needed just to get the capital stock back to where it was before the earthquake." Or something to that effect.

No. He wouldn't have said somthing like that. Otherwise we'd have to take the 2.1% off the 4.2%, leaving us with non-exceptional growth of just 2.1%. I stand corrected. So he has......

And as far as global economic growth goes....well...

"...U.S. citizens are on the brink of a political revolt, based on a declining standard of living .....This would happen in any nation where a vision of prosperity has been shown to be a Ponzi sham, ....the depressed state of the U.S. citizen getting worse.... unemployment rising and another recession near. The latest US poverty data is staggering. Some 42 million Americans were in receipt of food stamps in July, up some 18% yoy ..."

Read more: http://www.businessinsider.com/socgens-albert-edwards-says-the-us-public-is-about-to-revolt-2010-10#ixzz132pDx4zC

Agree......quite why westpac thinks next year is so good when looking at the US it looks so bad and in fact I mean really realy bad....I dont know.

The Q has to be asked, why would you bank with morons like this?  would you think your money is safe?

Wake up guys, unless the US Govn can shutdown the legal issues around the mortgage fraud its going to go very very badly. If they do do so, well the US voter is would have to be blind or stupid to not either to give up and stay at home or get very angry....or both.....

Even if Obama is stupid enough to stop the massive legal actions that are coming he cant make ppl feel happy and safe...this is going to finish him I reckon....1 term President....Palin will be even worse of course....but its not much of a choice when Obama promised change and hope and not only didnt deliver but in fact sold ppl out....

regards

 

 

 

Obama was always doomed, I feel sorry for him. I like him. I mean the guy got the biggest hospital pass. It was previous administrations's negligence that let the property bubble get out of hand, with bad loans everywhere. Of course the greed of the people didn't help - let's not forget the collective impact of the collective greed

As far as I am concerned, it doesn't matter who gets in power in the states, there is little they can do. They got themselves in a mess that is going to take a while to shake out. If the Americans think the woes are due to Obama, and that a change of administration will sort them out then they are in for a nasty shock 

America will suffer more than Japan did after their bubble burst. The Japanese saved more, and also didn't have such unmanageable debts

How bad will things get in the USA? Hard to know. Will it struggle for a few more years then gradually pick itself up off the floor? Or is this more permanent? Is there likely to be civic strife?  

I thought ****maybe**** he could or would do something....given the terrible situation I thought he could actually act....but it seems not.

regards

growth of our key trading partners such as America? haaaaaaaaaaaaaaaaaaaaa

You lot are a bunch of pessimists

Right you are Jimbo....and we will watch as the Elephant sits on you...we won't get too close though......why don't you pop off and have read of this....all of it!.... http://www.marketoracle.co.uk/Article23669.html

We are a bunch of pessimists! hahahahahahahahahahahahahahahahahahahah

Show me something positive out there....but in fact multiple things....there is optimism and p*ssing into the wind, you know your legs get wet....

regards

Aussie banks are NEVER wrong............. phhhhhhhhhhhh

I would love growth at 4%+ , and its possible off a low base , but it could be wishful thinking

 ..... especially if the NZ$ strengthens too much. Our  wine exports are already history , our milk exports  will come under pricing pressure , and tourists will find us too expensive .

The root problem is still  with our Economic Fundamentals :-  we are too indebted , our savings  levels are too low , our investment levels in the productive sector are too low ,  our unit labor cost is too high , non-renewable energy (oil) costs are too high and there is a risk of importing  inflation from the US ( when it starts ).The property market has still to unravel itself  

Domestic business confidence is still  low , and consumers are trying to pay down debt . 

Worst of all,  the causes of the GFC have not been allowed to sort themselves out , they have been papered over with QE and all manner of clever trickery 

All round its not a good look , but there is HOPE  

I would love growth at 4%+ , and its possible off a low base , but it could be wishful thinking

 ..... especially if the NZ$ strengthens too much. Our  wine exports are already history , our milk exports  will come under pricing pressure , and tourists will find us too expensive .

The root problem is still  with our Economic Fundamentals :-  we are too indebted , our savings  levels are too low , our investment levels in the productive sector are too low ,  our unit labor cost is too high , non-renewable energy (oil) costs are too high and there is a risk of importing  inflation from the US ( when it starts ).The property market has still to unravel itself  

Domestic business confidence is still  low , and consumers are trying to pay down debt . 

Worst of all,  the causes of the GFC have not been allowed to sort themselves out , they have been papered over with QE and all manner of clever trickery 

All round its not a good look , but there is HOPE  

As always the reality will be half way in-betwen but that sort of comment is mundane and boring, far better to be sensationalist, eh Wolly

 

 How on earth do these guys come to this figure....oh thats right...picks 4.2%

couldnt pick their noses.....

why do the media get so wrapped up in these headlines....

There is no substantive evidence to support this figure......other than  guessing

we will have  another ECOMIST ...alright  economist.....no difference

Tell us next week that  GDP will  be 2%  4% 6%......no wait why no go for broke and announce a GDP  of     -5%    that should blow everyone away.

More bollocks from bank economists

He mentions strong global growth....China is predicted to drop back a abit, as is Aus

Europe and the USA are in the doldrums

Over 4% growth....good material for  a Tui ad

I reckon it wil be 2.5-3% - a bit better this year, but far from boom times

I'd bet -2.5%.

regards

doubt it very much...not saying that won't happen, just think its very unlikely...would take something severe like the Chinese and Aussie economies slumping....very unlikely but not impossible...hope like hell it doesn't happen, as that wouldn't be pretty

Still think we will get reasonable growth (albeit off a low base), just not great growth  

I think its the most likely outcome as things stand right now.

My reasoning is as follows,

1) The finanancial crisis has not gone away....it was stabilised a bit sure, but its still deteriorating...now however the mortgagate fraud looks to blow up....the legal issues are going to kill the banks....so huge loss of confidence on lots of levesl, share prices, bonds, spending by the consumer, companies.....maybe TARP2 and QE2 to stop BofA for one going under....Hello Lehman only worse.........ground hog day comes to mind.

2) Its almost certain for me that GOP will be in control in America after November, these are ultra-neo-con nut cases who have no clue, anyone who starts their opening election speech by saying they are not a witch, isnt mentally all there. So they will stop the "deficiet madness" and even probably lock up Central Govn, criple Obama, put in yet more policies based on nutty christain "values" that simply wont work......that alone will destroy hope in the US's real economy.... ie they can force in-action and stop spending but they cant make ppl spend they cant force ppl into jobs that dont exist...all they will produce domestically is bigger tent cities...

3) GOP will then "attack" china (economically with sanctions etc not with bombs...at least I hope not) as a) they think they are entitled to, b) They will need someone to blame and the chink across the water is an ideal scapegoat c) They are nutcases with god on their side....

4) Cost of energy, for every other recovery oil was cheap, now its at the level that is in danger of triggering another recession...it just costs too much to do things.

I agree, it will be ugly....but it all looks so awful....its not like yes we are at the bottom and the excesses have been cleaned out so we are fit and lean and ready for the expansion and recovery...they are still there and in fact getting bigger...

regards

 

 

 

 

 

 

 

 

 

As I said before, I am not totally dismissing your prediction. All these things you talk about are quite possible. I just think on balance it won't be quite that bad. Part of me is probably hoping (for all of our sakes) that it won't be that bad too

Oh Im hoping as well...

The latest news from America: Fannie and Freddie May Need Infusion

If the economy recovers more quickly than expected, the projections show that the companies could need as little as $6 billion in new aid. By contrast, if the economy falls into recession, the companies could need another $124 billion.

http://dealbook.blogs.nytimes.com/2010/10/22/fannie-and-freddie-may-need-infusion/

More work for helichoppers and printers !

So Brendan O'Donovan, we are about to have a better growing season eh? Tell that to the cropping boys in Gissy as they replant hundreds of hectares of crops after last weeks deluge. Oh and don't forget the thousands of ewes and lambs that went west in the snow down south. Oh and don't forget the exchange rate that is still screwing us all out here in Ruraland 

Quite right deebee

And things aren't so rosy in the big smoke either

Finance for development is still munted

Retail is shaky

look, I'm no doom merchant. Things WILL be better next year (bit of  boost from ChCh rebuild, World Cup etc) , just not in the order of 4.2% growth

I'm pretty skeptical of these bank economists's motives. build up confidence so more people feel confident to go out and buy houses??????

I wonder....maybe the summer house selling season looks really bad and they think a line of bull droppings will encourage buyers......they cant live on the same planet I do.

regards

another question for westpac...even if china and aus stay fairly strong, surely the woes of the USA and Europe are still going to have an influence on us

has anyone hypothesised that maybe the whole 2000's greed thing was prompted by 9/11?

maybe its the Matt in Auck theory

Just maybe, there was a collective sense of mortality after 9/11 which prompted a collective feeling of "let's live life to the fullest while we can"

a similar thing purveyed in the 80s during the height of the cold war

maybe its my imagination and  coincidence but after the cold war the 90s seemed far less greedy and hedonistic, only for 9.11 to bring it back

thoughts???????

Matt in Auckland, you may a point...

Its also may be the only way we will get 4% if the growth is based on the assumption everyone in Canterbury after a near death experience spends all their remaining wealth in the first quarter LOL

Seriously the several economic shocks we have had domestically in this laster quarter will take take longer to overcome than people are expecting....it will take a lot of time to repair land before building in Canterbury this an't happen come 1 Jan!!! Also the permanent loss of weath has major influenece on confidence in the region...

If the loss of argicultuire through wether has no effect of substance, can only make up for ot next season....then you have to think we are just a one trick pony...Dairy industry we ride....

 

We will have some sort of economic event over the Northern winter...just wait for it...

Speckles - I agree. The ChCh e'quake, the agricultural problems etc. will weigh on growth until at least February / March. We may see some pick up then as those issues are worked through and ChCh starts rebuilding proper. then the world cup comes.....but how much real boost wiill the World Cup be? Its just a short sharp boost isn't it? And the way the UK is going, how many poms will be coming down and spending tonnes of money, especially with the pound so weak against the NZ dollar. Also, how will the SFC fiasco play out and what will that mean for NZ economic confidence and growth. Also doesn't an election usually put a slight brake on growth? Although  perhaps this time it won't because (at least at the moment) the result seems pretty certain (I only see decent challenge by Labour if Key does something really stupid, he loses the leadership, and that clown English takes over) 

I also agree that further economic ugliness is coming this northern winter (I'm totally unsure of the degree though). Those economists who think we will go great guns just because China is - forgetting about the troubles elsewhere - need their heads read. Remember China will slow a bit too if USA and Europe remain sick (or get sicker). NZ has NOT decoupled from the USA and Europe

Infrastructure development is starting to slow as some of the Govt's injection is starting to drop away. This was confirmed by heads of Fletchers in a recent Herald article

Private devleopment sector is likely to remain sluggish in 2011 as finance remains limited. this applies to residential development (finance issues) and commercial (sufficient supply and lack of finance),

tourism will struggle along, just surviving with Aussie and Chinese tourists. Retail may pick up slightly

     sooooo........Sticking with my 2.5 - 3.0 % maximum growth for 2011 prediction - far from doomsday but also far from the rose-tinted predictions of the bank economists

Trouble is that most of the comments here are no better than 'pub scholars' talking and simply look for some info that subscribe to their view, filtering out of course anything to the contrary. Some people seem to be rather opinionated if  they claim to be more knowledgeable than people who are trained and experienced at their job.  Expect they could coach the All Blacks better than the present ones as well.  And no doubt have more political nous at runing the government than the PM.  So, If you are that good and knowledgeable about something, go for the job-  but you might find that others might question your expertise and regard your application as a joke.

Who you talkin about man?

I'm never opinionated ......  You don't need to be when you're always bloody well right .

Muzza grazias – muzza ! You are soo reith some poeple cunt even spell righd.

 "Mr Toplis expects the economy will grow by 3.5%, a whole percentage point higher than the central banks' prediction".....zb

Hahaaahahaaa....the Westpac nuts out guess Toplis....what a frigging joke....let's ask the monkey at the zoo....

From personal observation, the only people who get economic and market forecasts more wrong that economists are members of the public and bloggers - they have very short memories of what they previoulsy claimed would have. I listen to economists, and I listen to other opinion, but I rarely dump on people with a different view.

Kunst as leader of The Expert Party to take NZ into a bright future.  And while at it, to be All Black coach for NZ to win the RWC

Sorry Wolly, you are now only Deputy expert! By the way, Grant A seems to be a sensible observor don't you think?

So what he's saying is he believes what he hears and reads from those he knows to be right and listens to other opinions but refuses to have his mind changed by them because they are not the ones he knows to be right!....doh

ZING ! Wolly 1 , muzza 0 : Excellent riposte , bravo sir .

Wolly - where did I say that I don't make up my own mind, what I said was that I try not to  dump on people with different opinions. For the record, I was hugely bearish about the world in the 2004 - 07 period (referred to as chicken little by my work collegues through that period), and don't for one moment think anythings been resolved, just postponed. But timing is always the hardest part of forecasting.

I also sit in the inflation camp but acknowledge the argument that the defaltionists make - but I believe that QE will eventually induce inflation but have no idea whether we're talking the next 1-2 years, or 3-5 years away - I'm just hoping that its a milder version than what the hyperinflationists are expecteing.

I'm certainly that much of the developed world's growth rates will be minimal for a good number of years (1-2% for 5-10 years which will feel like a depression even if they technically avoid it) and developing world growth much higher 5-6%. The later had a third of the world GDP in 1990, 50% now, and forecast to be two thirds by 2020 - they are what counts

But NZ ? we sit a bit in both camps, and whilst a recovery of 4% for a year off a low base personally wouldn't surprise me, I'm hoping that with good economic management we can muddle through the longer period with a 2.5 - 3.5% growth rate.

 

 

Pardon me but..... " the only people who get economic and market forecasts more wrong that economists are members of the public and bloggers - they have very short memories of what they previoulsy claimed would have."

Sure reads like rubbishing many who post opinions on this site GA...just run of the mill members of the public, who leave their qualifications and experience out of it....here we have 'economists' employed by the banks making statements about the future GDP rate and they vary by up to more than 2%. They need to be taken to task over their statements. Where else but on this site does that happen?

I have a good memory of my opinions going back years on the mismanagement of this economy. I do agree inflation is going to arrive and it will be bad. I do think the govt is more worried about protecting bank profits and that they don't give a dam about property being seriously unaffordable. I also believe the media by and large amounts to a giant poodle and is incapable of accurately reporting on the economy.

No offence intended...but do you really make up your own mind...do any of us!

Actually Wolly, quite the contrary, I'm not rubbishing their opinions at all, in fact many often make me reconsider or at least think harder about my own. What I was pointing out was the fact that most are no better forecasters than economists so I have a real issue with those (admittedly the minority) who rubbish other opinions

e.g.

"More bollocks from bank economists" ...... culd be more polite, but to be honest Matt's comment is one of the kinder put downs you'd see on such bloggs.

And a view that I still subscribe to, and pretty much was he's been warning us of for several years, now. Deflation, first; then inflation:

"..readers will be familiar with Albert Edwards’ post bubble Ice Age thesis of Japanese style deflation writ large across the globe....The end game for the Ice Age was always going to be monetary debasement, competitive devaluation and a trade war. As US unemployment begins to rise, do not be surprised when across-the-board tariffs are implemented if China does not revalue."

http://ftalphaville.ft.com/blog/2010/10/20/376441/the-end-game-approaches/

" do you ever really make up your own mind....do any of us" ?  Very good point, no I guess not, especially in this environment

Yeah fair enough GA but I see the bank economists as a key part of the bank spin and deliberate effort to encourage people to think they should borrow from the banks and buy property...and I am certain these same 'economists' would likely have very different opinions were they not employed by the banks. So I think they deserve to have their opinions rubbished.

Try finding one who has said publicly that if people were to reduce their demand for mortgages, prices would likely fall more quickly....you will have a better chance of seeing flying pigs.

What happens if as seems likely, the donkey loses to the elephant in the US elections!...will that mean an abrupt U turn away from Keynesian madness and bring rising rates...how would that hit Noddyland?

LOL - I agree with your last point in that they may not be able to go that far. But that said, whilst I'm not an economist, I work close enough to a number of them, from a number of different banks, and genuinely do not think they deliberately push out views to suit the banking business. I have never seen evidence of that, and think I'm close enough to know - if I wasn't I suppose a suspicious nature make give me the same opinion.

I believe that they have integrity, but where I think they are guilty is in being hamstrung from being able to be too extreme in their views (even when they think the arguments are strong), or political (even when bad behaviour/economics is being seen within Govts) - that's just not where banks operate, and why bank economists are deemed mainstream I guess.

 

Grant - as you would have read I am a prominent critic of the bank economists, and to be frank I think they deserve the criticism.  They are frequently VERY wrong in their forecasting , and forecasting is a big part of their job. If I make significant mistakes as an architect with design then I expect to pay the price. I don't see why the economists cannot be exempt from criticism. There was far too little criticism of them, the financial system and the whole easy-to-see-growing bubble during the 2001-2007 years. And yes, the forecast of bloggers here may be no better (although I could honestly say I have been consistently more accurate in the last 2-3 years than the economists),  but we are not "experts" in the field . ..they have all the data at their fingertips, and we don't...but therein lies what I see as problem - they are so focussed on data, and minutae, that they sometimes don't see bigger patterns and pictures

And its not just bank economists...Infometrics in mid 2009 picked a 24% increase in house prices in the 3 years to 2012. We are currenty at about 0% growth nearly half way into their prediction, and  I doubt very much we will see more than 10% growth, let alone 24% growth in the next 1.5 years. 

I don't really believe they intentionally talk up opinions to suit the banks, on a conscious level. but I DO believe that their subconscious IS playing a part in their views. Because, at the end of the day, the banks are their paymasters, and a slumping bank quite possibly means less or no bank economists. I do also think economists in general tend to stick with formulaic thinking and conventional approaches. There are some economists that I really respect - the "Unconventional Economist", the freakonomics guys - who do look beyond formulas and status quo thinking. I do also think NZ economists are struggling to comprehend hat we face a "new normal". They do seem stuck in a 2005 mindset. Of anyone of them BERL seem to have grasped the new realities best.    

the fact is, they like everyone need to be kept honest

It goes deeper than that.  This is 90 minutes long http://dailybail.com/home/dr-william-k-black-the-great-american-bank-rob... but towards the end William Black mentions economists and regulators.

Now that is America, does it apply here?  Well we have the same basic central bank/bank model so yes.

When we can have a debate here about the simple fact that money is debt and that money is printed out of thin air when the borrower signs for it is an indication.  Is securitisation OK, and if it is under what conditions.  Has any economist actually modelled what happens when securitisation is utilised (in a system where the central banks will buy the securities).  Anyone can see that that they are wrong, but it's hard to explain why, and even then there is probably good justification for certain circumstances where they could be used.

 

Well many who have worked in economics/financial economics will tell you...if they don't rely on it now for a paycheck...you hold them and their forecasts in high regard at you peril, especially if you did not pay for independent advice.

However an understanding of economics in principle, couple with observations from people in their respective industry does allowed you to make timely decisions in the short term. So reading this blogg provides on occasion some real gems of information.

Shooting others down who bring a different slant from their professional/industry experience is missing a real opportunity to be more informed.