Christina Leung: NZIER Principal Economist on NZIER's predictions of New Zealand's slowing economy

The economy could be slowing down more than expected. 

NZIER is revising down its forecasts for annual average GDP growth to 0.2% in the year to March this year and 0.6% in the year to March next year. 

It says high interest rates are continuing to dampen demand. 

But Principal Economist Christina Leung told Mike Hosking that strong migration growth should ensure the economy starts growing again. 

She says migration is expected to support demand across a range of areas, particularly when it comes to construction. 

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Episode Transcript

Speaker 1 (00:00):
From seven in there. Right back to the economic situation
in which we face is currently in this country. New
forecast for our economy as we wait for the Q
one figure on Thursday. Of course, NZIAR have revised their
annual GDP stats for the year's ending March twenty four
and March twenty five. They're down to zero point two
percent and zero point six percent, respectively. Deputy Chief Executive

(00:21):
from the NZI, Christina Leung, is well us, Christina, very
good morning to you. Whatever what have you gotten? Q one,
by the way, for Thursday are going backwards.

Speaker 2 (00:29):
Or forwards, So we are actually forecasting a flat result
for the March quarter of this year. Now that reflects
actively indicators which suggests weakness and construction and profit personal
services overall, we wouldn't be surprised if lad ere a
small negative or a positive, and that's generally a weak
result for the news and economy.

Speaker 1 (00:50):
Okay, So if Q one is flat, then Q two
will be flat air, won't it?

Speaker 2 (00:54):
Overall? In terms of the outlook ahead, we're expecting week's
growth for the coming year. Now. That reflects combination of factors,
the fact that we've got higher interest rates, the impact
of that is becoming more apparent in terms of dampening demand. Now,
it's important to remember that that's intended by the Reserve
Bank when it first increased the ocr back in October

(01:14):
twenty twenty one. It needed to reduce demand in order
to take the heat out of the news and economy
so that it can bring annual inflation back towards its
one to three percent inflation target band. But on top
of that, what we're also seeing is that heightened uncertainty
regarding the new government's priorities when it comes to spending
and also cut back from the public sector. So what
we're seeing is that households and businesses are becoming much

(01:36):
more cautious when it comes to spending and investments.

Speaker 1 (01:38):
That is true when you go out to March twenty
five and you found zero point six percent. Where is
the growth? Where's it coming at? Is it Q three
Q four?

Speaker 2 (01:47):
So yes. So firstly, the latest NJEDAAR consensus is actually
captures the forecast of eight organizations which produce forecasts for
the New Zone economy. That said, the outlook the average
of those forecasts broadly in line with where we have
our expectations for the News and economy. In terms of
where this growth is coming from. We are seeing shroll

(02:07):
migration leap population growth, so on an aggregate level, it
is still expected to support demand across a range of areas,
particularly when it comes to construction. Certainly, when we look
at the new tom outlook for construction, if we look
at things like dwelling consent issuance and the ended a
core lesser business opinion architect's measure of our pipeline when
it comes to construction activity across residential, commercial and government work,

(02:31):
that still looks pretty weak for the coming year. But
we do expect that beyond the coming year, from next
year onwards, that aggregate growth that will start to pick
up given the shroal migration leat population.

Speaker 1 (02:43):
So you're broadly of that argument hang on in twenty
four and something arrives a bit better in twenty five.

Speaker 2 (02:49):
Broadly, yes, that is our expectation and also appears the
expectation of our ended a consensus panel of eight organizations,
and that reflects also the expectations that from next year
we will start to get interesstrate decreases. Now, as I
was saying, we are what we're seeing at the moment
partly is a result of high interest rates stampening demand

(03:11):
so that inflation can reduce back to its one to
three percent inflation target ban. But once that happens and
the Reserve Bank is confident enough that the inflation is
anchored back towards the inflation target band, we will start
to see interst rate cuts and that should start to
support demand across a range of sectors over the coming years.

Speaker 1 (03:33):
I hope you are right, Christina. Christina Jung, who's the
deputy chief executive at the ends that I might for
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