NZIER Consensus Forecasts Show Lower Growth Outlook Beyond Higher Starting Point

New Zealand Institute of Economic Research (NZIER) says that its "Consensus Forecasts show a downward revision to the growth outlook over the coming years, despite the stronger starting point. The revisions reflect expectations of weaker activity across most sectors from 2023. Although the recovery in demand was stronger than initially expected as lockdown restrictions were relaxed, there are increasing headwinds for the New Zealand economy. These headwinds include continued global supply chain disruptions as countries continue to grapple with COVID-19, the war in Ukraine and rising interest rates."

• "Beyond the higher starting point, Consensus Forecasts for GDP have been revised down throughout the projection period. This reflects headwinds facing the economy as the COVID -19 pandemic continues to cause global supply chain disruptions and central banks raise interest rates in response to the surge in inflation."
• "The inflation outlook has again been revised higher , with annual CPI inflation expected to remain above the Reserve Bank’s inflation target mid -point of 2 percent through the coming years. The high inflation environment reflect s the effects of supply constraints on the price of imported goods and capacity pressures in the New Zealand economy."
• "The unemployment rate outlook is broadly unchanged, with expectations for slightly softer employment growth and a slightly higher unemployment rate later in the projection. However, wage growth has been revised markedly higher throughout the projection. The labour market remains very tight, and the generally high inflation environment is supporting stronger wage growth."
• "With major central banks around the world highlighting their increased concern with inflation and embarking on monetary policy tightening, the interest rate outlook has again been revised up."
• "The NZD TWI has been revised lower across the projection horizon. Although the Reserve Bank of New Zealand was early in tightening monetary policy, as other central banks have followed suit , this has reduced the yield attractiveness of NZD - denominated assets . This has put downward pressure on the New Zealand dollar."
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