Infometrics is expecting GDP growth of roughly 2% a year until 2021 – 1% under Treasury’s forecast – and the regions are expected to do the economic heavy lifting

New Zealand’s regions are expected to take centre stage in the country’s economic growth story over the coming years, according to Infometrics.

But the economic forecasting agency is picking annual GDP growth to come in well below Treasury’s estimates.

Infometrics Chief Forecaster Gareth Kiernan expects economic growth of roughly 2% per year between now and 2021.

That is more than 1% lower than Treasury’s economic forecasts, which show GDP growth of 3% a year on average until 2021.

National Finance Spokeswoman Amy Adams says Infometrics’ is “far from a glowing endorsement of this Government’s economic management.”

Despite the lower growth forecast, Kiernan says it will be New Zealand’s provinces that will be doing a lot of the economic heavy lifting over the next few years.

“Spending activity in the regions is comfortably outpacing activity in the main centres, with commodity prices for most exports holding at high levels.”

He says many of the major drivers of economic growth in the urban centres, such as migration, construction activity and the housing market, have peaked.

“Most of the New Zealand economy’s momentum over the next 18 months will come from provincial areas, thanks to strong export incomes.”

This growth won’t be enough to offset an expected economic cooling going into 2019 he says, but it is likely to make the slowdown “less marked than previously feared.”

Kiernan says a shortage of skilled and unskilled workers will continue to act as a drag on economic growth going forward.

“Low business confidence suggests that domestically focused firms are already reluctant to invest or hire.”

Adams says the Government is not doing enough for business.

“The Government inherited a buoyant economy and seem to just expect that growth is inevitable and will continue to increase no matter what policies they implement.

“However, its low-growth policies have a big effect on whether a business invests in that new piece of machinery or hires that extra staff member.”

Not the first bearish outlook

Infometrics is not the first forecaster to predict lower economic growth going forward.

Following last month’s GDP figures, ANZ Senior Economist Liz Kendall said the bank expects economic momentum will continue to slow.

“The economy is growing a bit below trend and we expect it will struggle to achieve strong rates of growth from here.”

But not all economists agree with the bearish economic sentiment.

BNZ’s Head of Research Stephen Toplis says the second half of this year will see a big boost to the economy provided by a substantial easing in fiscal policy.

This will come in the form of the Government’s families package, for example.

“Accordingly, we think annual growth will climb back up to 3% by the end of the September quarter,” Toplis says.

Kiernan says the increased Government spending will help cushion the forecast economic slowdown and its healthy books mean it has scope to go further in the future.

“With Treasury’s forecasts showing an increase in the surplus to $7.3 billion by 2022, and higher government revenue expected, the government has scope to further lift spending while keeping its books in the black.” 

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7 Comments

'Regions' have always done the heavy lifting for New Zealand. There is quite a lot going on.

With Wellington the erratic pilot and Auckland the drag.

They have also provided the greatest asset NZ has: educated young adults who flock from the regions to the cities for work. Cities are population sinks effectively subsidised by the huge time and resource inputs of regional parents.

The regions. Ha!
Excepting Taranaki, the wings have already been pulled off that Butterfly by the Coalition's ambush knife to the back of oil and gas industry.
Oh and Westcoast. Ban forestry, ban mining. Squish. Screw the ferals, they're not important people like me living in my leafy suburb.
And can't do extra dairy anywhere. Greens want less cows/income. Gotta stop it in the barren and unpopulated Mackenzie country that I should dictate use of because I drove through it once 12 years ago.
Oh and of course we need to block any new irrigation schemes that might lift agricultural output, because man bad, change bad, business bad.

The luddites are in govt. The regions are not going to be able to save us from their bad choices.

“Spending activity in the regions is comfortably outpacing activity in the main centres, with commodity prices for most exports holding at high levels.”

He says many of the major drivers of economic growth in the urban centres, such as migration, construction activity and the housing market, have peaked.

Spending growth has stopped in the main centres.. well duh, everybody's spending money is going into servicing stupidly overpriced mortgages thanks to the housing Ponzi (and to a lesser extent, rents), and just going to get worse once Wellington or Chch council manages to convince the Beehive that they need a regional fuel tax too. Regions are still catching up, but don't worry, you'll get your chance soon.

Amy Adams has no valid claim to make any comment at elected level. The RMA is deficient right from it's definition of sustainability, meaning that a society operating under it will not be sustained. How long before cessation is a question, but cessation is not a question, it's guaranteed.

https://www.populationmedia.org/2012/04/04/the-meaning-of-sustainability...

Yet even that wasn't enough for Adams. The Canty Regional Council - democratically elected - had to be sideswiped so farmers could make an unsustainable regime even more unsustainable.

That is what she will go down in NZ history for - nothing else. We have to move on from that kind. Sideline them. There are things to be done and too little time to do them in.

Poor old regions, expected to do the heavy lifting but big oil wants to pass the buck for climate change and Fonterra has been named.
https://oilprice.com/Latest-Energy-News/World-News/Meat-Dairy-Industry-S...