Immigration drives up expectations for New Zealand economy

A surge in immigrants has prompted economists to revise up their growth forecasts for the New Zealand economy, an independent economic think-tank said on Monday.

The Consensus Forecasts - an average of economic forecasts - from the New Zealand Institute of Economic Research (NZIER) indicated expectations of robust growth, with annual average growth expected to pick up to 3.2 percent over the coming year, before easing slightly to 3 percent by early 2018.

Beyond 2018 the growth outlook was more uncertain, said a statement from the NZIER.

While the consensus was for a gentle moderation in economic growth, some forecasters were picking growth would slow sharply to 1.3 percent by 2020.

The exceptionally strong population growth from the surge in net migration had underpinned continued strength in household spending, which was expected to remain strong.

Strong population growth had also boosted housing demand, with residential construction ramping up in response and this was expected to grow solidly over the next few years.

However, reflecting the increased uncertainty over the more fragile global growth outlook, the consensus forecast for export demand was for a slight softening in growth from the past year, though forecasts ranged from a slight contraction to a strong lift.

Forecasters also expected inflation pressures to remain weak, largely reflecting the effects of the high New Zealand dollar and lower fuel prices on the price of imported goods.

Despite the lower inflation outlook, forecasters were generally confident that inflation - currently at 0.4 percent - would lift close to the Reserve Bank of New Zealand's 2-percent inflation target later in 2018.

The Reserve Bank cut the official cash rate to 2 percent last month and indicated further easing was likely, so the consensus was for one further rate cut over the coming year before increases from 2019. Endit