Still recovering

New Zealand’s economy continues to strengthen, according to the ASB Quarterly Economic Forecasts released this week. Increased construction activity and higher dairy incomes are driving the recovery. “The economy remains comfortably on course for 3.5% growth over the next year. Construction and dairy remain key drivers, but the recovery is broadening,” ASB chief economist Nick Tuffley told the market.

The housing market is cooling but increasing migration is fuelling population growth pressures that will partially offset tighter monetary policy. House price inflation will slow gradually rather than abruptly in the centres that have been running hot, according to Tuffley.
But ASB sounded two cautionary notes for New Zealand’s economic performance. Dairy prices have fallen quite rapidly in recent months, down 20% in the Global Dairy Trade auctions.

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