Gareth Kiernan: Infometrics Chief Forecaster on predictions that economic growth will reach a four-year high next year

The country's economic recovery may be coming. 

New Infometrics forecasts show annual economic growth is set to reach a four-year high of 2.7% mid-next year. 

They show the chances of yearly inflation continuing above 2% by then have dropped. 

Chief Forecaster Gareth Kiernan told Mike Hosking that as long as fuel prices stay at manageable levels, they expect to see positive indicators return over the next six to twelve months. 

He says we’re nearing the point where we’re growing as fast as we can without generating inflation, and they do see a case for rates increases, but nothing as fast as they were previously looking at when fuel prices where over $3 a litre.  

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Episode Transcript

Speaker 1 (00:00):
Very keen to when the week the way we started
actually with good news new forecasts from Informetrics this morning's
got the GDP peaking at two point seven mid next year,
which is good. So the recovery therefore would seem to
be real. Gareth Kennon as the Informetric's chief forecaster and
as with us, Gareth Morning morning, Mike's been in a
pretty good week. Manufacturing's back services, back confidence up a
little bit. Are you bullish broadly on the economy?

Speaker 2 (00:23):
Yeah, broadly. I mean, as long as the sort of
events over the last week don't escalate into some much
higher fuel prices. Again, we're looking at the sort of
economic indicators coming through. Like you say, it's almost a
bit of a resumption of what we had near the
start of this year. We're prior to that war kicking off,
we had less patchy indicators coming through. Things are more
positive and we see that occurring over the next six

(00:47):
to twelve months. Again, as long as those fuel prices
stay at manageable levels that.

Speaker 1 (00:51):
Two point seven, are we maxing out ish at that
point before we start driving inflation and stuff.

Speaker 2 (00:58):
Yeah, you probably are getting to that point where it's
about as fast as we can grow without generating inflation,
and we do still see a case for interest rates
because of that needing to rise through the next twelve
months or so, but nowhere near as fast as we
were previously looking at when fuel prices and diesel prices
in particular, we're up and over three dollars eight year eter.

Speaker 1 (01:18):
Okay, so we got cash right at two and a half.
You see three and a half, So that's four ish
increases that happens what between now in the middle of
the year.

Speaker 2 (01:26):
Yeah, so a couple more this year, and financial markets
are reasonably consistent in terms of that expectation, and then
we've got two more penciled in through twenty twenty seven. Look,
I guess for us, it's a case of tapping the
brakes on the economy a little bit by the time
we're getting to that two point seven percent growth. And
that's quite a different scenario than we were looking at before,
where we thought, well, the ocr may need to get

(01:47):
to four and a half just to try and bring
the car back under control, because we've been hit by
an old man with a fake tan in the bazooki
who doesn't really look where he's.

Speaker 1 (01:54):
Going where's the growth coming from. Is it more broad
based than what I would expect, you know, which is
usual suspects.

Speaker 2 (02:04):
It's probably one of those old fashioned New Zealand economic recoveries.
You've got the export sector and obviously parts of the
South Island showing this particularly over the last six to
twelve months, performing well with strong commodity prices. You look
at meat, horticulture and to a lesser extent, dairy all
going pretty well. We are expecting that to sort of
continue to flow through over the next year or so,

(02:26):
impacting positively on consumer spending. And we're already we have
already been seeing positive signs around business investment as well,
so increasingly broad based over time.

Speaker 1 (02:34):
What about housing, Does it play a role or not?

Speaker 2 (02:38):
Probably not. I mean we look at the housing market
at the moment still heavily oversupplied in terms of the
number of properties sitting out there waiting for people to purchase,
and so in that situation, we're not looking at house
prices picking up particularly anytime soon. The migration outlook is
stable rather than you know, racing off to bring in
a whole lot more people into the country, and so yeah,

(02:58):
housing probably not part good.

Speaker 1 (03:00):
On your mate. Nice to catch up. You have a
lovely weekend. Gerrikin and Informetric's chief forecaster with us this morning.
And by the way, on the broad subject of the economy,
gave you Hawaiian Airlines who are not coming back into
walking from Honolulu. But the good news is Cafe yesterday
announced that they are coming back and expanding into christ Church.
So christ Church Hong Kong is an important route for
them and that's already part of the New Zealand story.

(03:21):
You might remember they're doing Tokyo, Singapore and Perth, so expansion,
seat capacity, all of that stuff continues to grow, which
we'd like.

Speaker 2 (03:28):
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