The latest NZIER Consensus Forecasts shows forecasters have revised up expectations of growth on the back of a stronger outlook for household spending. However, expectations of inflation and wage growth remain modest despite expectations of stronger activity.

The labour market outlook is more favourable, with expectations of employment growth revised up slightly while unemployment forecasts have been revised slightly lower. Despite expectations of stronger employment growth, wage growth forecasts have been revised slightly lower as a result of the expanded labour supply from strong population growth.

Similarly, the inflation outlook remains subdued despite stronger growth forecasts. The consensus expectation is that annual inflation will not edge back to the Reserve Bank’s 2% midpoint target until 2018.

Highlights: Annual average growth is expected to pick up to 2.9% in 2018, before moderating to 2.6% in 2019.

Annual average growth forecasts for the March 2019 year range from 1.6% to 3.2%.

Household spending growth will be even stronger over the next few years

Annual average growth in residential construction is expected to peak at 7% in the March 2017 year, before moderating in subsequent years.

NZD TWI to ease to an average of 69 by 2019. Some forecasters expect the NZD TWI to hold up at an average of close to 73 for the year to March 2019, while some
expect a depreciation to just over 65 by then.

Forecasters expect annual inflation will edge back within the Reserve Bank’s 1-3% target band by the end of this year.

Annual inflation to reach the Reserve Bank’s 2% mid -point target until later in 2018.

The consensus is for 90 -day interest rates to fall to an average 2.1% for the year to March 2018, before lifting to 2.6% for the year to March 2019.

Employment forecasts have been revised up for the years to 2018, with expectations for the unemployment rate revised lower accordingly. But wage growth forecasts have been revised slightly lower.

Media release:Consensus Forecasts