Satish Ranchhod: Westpac Senior Economist on New Zealand's economic growth rate

New Zealand could see faster economic growth than Australia, but fewer jobs.

In New Zealand, Westpac's now forecasting an economic growth rate will hit 2.4% this year, and 3.1% next year.

In Australia, it's forecasting a growth rate of 2% this year, and 2.2% next year.

Senior Economist Satish Ranchhod told Ryan Bridge we've been seeing more OCR cuts, but it hasn't flowed through to the job market.

He says New Zealand's seeing high unemployment and low wage growth, and Australia hasn't seen a similar spike in unemployment.

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Episode Transcript

Speaker 1 (00:00):
We're about to overtake the Aussies on GDP. That's the forecast.

(00:03):
GDP growth here should hit two point four percent by
the end of this year, the Aussies two percent twenty
twenty six, US three point one percent, the Aussies two percent.
But the Reserve Bank roller coaster we've been on with
the induced recession means that we're left with more spare
capacity in our economy. Statist Ranchard is Westpac with west

(00:24):
Pac and has been comparing us with the Aussies and
joins me this morning. Statistic, good morning, Good morning, Ryan.
So we're going to be growing faster but still have
higher unemployment for a while longer.

Speaker 2 (00:33):
Why is that exactly? We've had a deeper recession, as
you say, because we had tighter policy in the past
few years. It meant that we came to the last
downturn in a softer position in the Australians. And now
while we're going to be growing, we've still got that
lingering softness in the labor market. Means that it's still
going to be tough for a lot of us in

(00:54):
the next few years.

Speaker 1 (00:55):
So it doesn't matter how how much we how good
we get in the coming year is we're still kind
of bulged down by our past.

Speaker 2 (01:05):
We are getting better, but we do have to deal
with the fact that we're coming from a soft position,
and it's been pretty tough on a lot of fronts.
We did have quite strong inflation the last few years,
stronger than the Australians, even with higher interest rates, So
the downtown that we had was necessary to get some
of those cost of living pressures back for more manageable positions.

Speaker 1 (01:24):
Our reserve bank, obviously with the OCO, went up like
a rocket and then down like a ton of bricks.
Which reserve bank, if you had to pick one, performed
better over that period.

Speaker 2 (01:36):
I think these pluses and minuses from both strategy. Even
with those larger interest rate increases here we still had
some pretty tough inflation, and if we took a more
gradual approach we could be still dealing with much stronger
cost of living pressures. The more moderate approach in Australia
meant that they did have a firmer labor market, but
their interest rates are still tight now and even though

(01:56):
they're coming down, MW Zealand's got a better growth position.
It's a trade off to.

Speaker 1 (02:00):
Make what's driving their growth. What's driving ours.

Speaker 2 (02:05):
In New Zealand. What we are seeing are those improvements
in commodity export incomes. You're just seeing how we're seeing
better employment prospects in areas like christ Church in parts
of the South Island, and those lower interest rates here
they are going to be boosting growth, but it's taking
a while to come through across the ditch. They're still
seeing some firmness in the demand story, but some of
the big drivers from the past that are easing off,

(02:27):
especially their fiscal policy which drive a lot of activity recently.

Speaker 1 (02:31):
So tease, appreciate your time this morning, great analysis as
always to Teach Ranchard, Westpac New Zealand senior economists. For
more from earlier edition with Ryan Bridge, listen live to
News Talks it Be from five am weekdays, or follow
the podcast on iHeartRadio.