Economic research & market strategy

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Economic research & market strategy

Weekly Commentary

Weekly coverage of recent and upcoming economic and market events.

Weekly Forex and Interest Rate Outlook

Weekly coverage of rates and key themes influencing currency and interest rates.


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Economic Data Reports

Previews and reviews of the latest economic data releases.

Squaring the circle - NZ GDP review, Q3 2014 - 18 December 2014
The New Zealand economy continues to grow at a decent pace - but not as fast as thought, according to revised GDP figures. This goes some way towards explaining why inflation has been surprisingly low in recent years.

Brief reprieve - NZ current account review, Q3 2014 - 17 December 2014
The current account deficit widened by less than expected in the September quarter, but the impact of lower dairy prices will be on full display over the next few quarters.

Fortnightly Agri Update - 17 December 2014
The latest developments in New Zealand's agri markets.

Delayed gratification - NZ Half-Year Fiscal and Economic Update review, December 2014 - 16 December 2014
Economic activity is running strong, but lower than expected inflation has put a dent in tax revenue and will delay the return to surplus. The Government has responded by delaying some of its spending plans until the 2017 Budget.

A tale of two countries - NZ GDP and Current Account preview, Q3 2014 - 12 December 2014
Real economic activity is forging ahead, but nominal income is set to suffer as dairy prices have fallen. We expect GDP growth to accelerate to 0.8% for the September quarter, while the current account deficit widens to 2.9% of GDP.

RBNZ December Monetary Policy Statement - Overtaken by events - 11 December 2014
The RBNZ has clarified that it will keep the OCR on hold for the time being, but hikes are still expected for the future. However, this statement has been overtaken by events such as  plunging oil prices, and is now a bit dated.

Home Truths: Westpac's monthly commentary on the NZ housing market - 10 December 2014
A fresh perspective on the New Zealand housing market.

Oil still king - How falling oil prices will affect New Zealand inflation and the OCR - 10 December 2014
Falling global oil prices will push New Zealand inflation below one percent, cancelling the need for any OCR hikes in 2015. But cheap oil and low interest rates will also stimulate consumer confidence and economic growth. This is a potent cocktail for the housing market - the Reserve Bank may end up having to tighten macroprudential policy.

NZ Local Knowledge - 5 December 2014
An emphatic post-election rebound in activity in October-November, particularly in the housing market.

Ready steady build - NZ building activity survey, Q3 2014 - 3 December 2014
Building activity rose 1.5% in the September quarter, effectively sustaining the surge in the level of activity we saw at the start of this year.

Fortnightly Agri Update - 3 December 2014
The latest developments in New Zealand's agri markets.

RBNZ December 2014 MPS Preview - For the sake of clarity - 2 December 2014
Markets are in a bit of a muddle about the RBNZ's current thinking. The December Monetary Policy Statement should clarify the situation. The RBNZ does expect to hike the OCR again, but not until inflation is clearly rising - in other words, not before late 2015.

We are beginning our descent - NZ Terms of Trade, Q3 2014 - 1 December 2014
The sharp drop in world dairy prices this year is making its way through into the terms of trade. The 4.4% fall in the September quarter was the first stage in the 11% peak-to-trough decline that we expect over coming quarters.

Fortnightly Agri Update - 19 November 2014
The latest developments in New Zealand's agri markets.

The price is right - NZ retail sales, Q3 2014 - 17 November 2014
Retail sales growth continues to pick up the pace after a slow start to the year. A particularly large fall in retail prices helped to boost consumers' spending power.

Home Truths: Westpac's monthly commentary on the NZ housing market - 17 November 2014
A fresh perspective on the New Zealand housing market.

NZ Local Knowledge - 12 November 2014
The New Zealand economy looks to have accelerated again in the September quarter. Pre-election uncertainty may have weighed on housing, but there are early signs of a rebound.

Heating up, but not catching fire - NZ Labour market review, Q3 2014 - 5 November 2014
The unemployment rate fell from 5.6% to 5.4% in the September quarter, its lowest level since 2009.

Fortnightly Agri Update - 5 November 2014
The latest developments in New Zealand's agri markets.

Watered down, but still there - RBNZ October 2014 OCR Review - 30 October 2014
The RBNZ has watered down its hiking bias.

Smoke, but no fire? - NZ labour market preview, Q3 2014 - 29 October 2014
Employment growth is expected to have remained firm through the September quarter, pushing the unemployment rate down from 5.6% to 5.4%. However, wage inflation is likely to have remained subdued.

Back to square one - NZ Consumer Price Index review, Q3 2014 - 23 October 2014
The rise in annual inflation that gave the green light for this year's OCR hikes has now largely dissipated. The RBNZ will want to see more tangible evidence of a pickup in inflation pressures before acting again; on our inflation forecasts that won't be until September 2015.

Stand down - RBNZ October 2014 OCR Preview - 23 October 2014
Inflation is likely to remain low for quite some time. Consequently, we now expect the RBNZ will leave the OCR unchanged at 3.5% until September 2015. Next week's OCR preview will express a similar sentiment - the OCR is set to remain on hold for the foreseeable future.

Taking a step back - NZ Consumer Price Index preview, Q3 2014 - 16 October 2014
We expect annual inflation to slow to 1.1% in the September quarter, reflecting smaller increases in food and fuel prices compared to a year ago. The story remains one of subdued domestic inflation pressures and a still-high NZ dollar dampening tradables prices.

Fortnightly Agri Update - 16 October 2014
The latest developments in New Zealand's agri markets.

Home Truths: Westpac's monthly commentary on the NZ housing market - 13 October 2014
A fresh perspective on the New Zealand housing market.

NZ Local Knowledge - 9 October 2014
Monthly indicators suggest that the economy continues to grow at a solid clip, though off the pace of late 2013 and early 2014.

Easing back - NZ Quarterly Survey of Business Opinion, September 2014 - 7 October 2014
The September Quarterly Survey of Business Opinion suggests that while the economy is continuing to grow at a healthy pace, the rate of growth has taken a step down since early 2014.

NZ Employment Confidence Index, Q2 2014 - Tortoise meets hare - 6 October 2014
New Zealanders saw a further improvement in labour market conditions over the September quarter, even amidst signs that the economy's momentum has passed its peak.

Fortnightly Agri Update - 2 October 2014
The latest developments in New Zealand's agri markets.

Westpac McDermott Miller Regional Economic Confidence, September 2014 - Confidence fades in most regions - 29 September 2014
Regional Economic Confidence continued to fade in the September quarter, but remains in positive territory. Falling dairy prices, rising interest rates and more mixed economic news are all likely to have played a role in the decline in confidence. Economic confidence improved in only two regions this quarter, the Bay of Plenty and Nelson/Marlborough/West Coast. In three regions, confidence has fallen into pessimistic territory. Canterbury remains the most optimistic region in New Zealand for the 9th consecutive quarter.

From a boil to a simmer - NZ Consumer Confidence, Q3 2014 - 22 September 2014
Consumer confidence fell to 116.7 in the September quarter, but remains elevated by historical standards. There has been a notable deterioration in consumer’s view of the economic outlook over the year ahead, but little change to their longer term view. Elsewhere, there were widespread modest declines in other key measures of confidence, consistent with a slower pace of growth in the economy over recent months.

NZ GDP review, Q2 2014 - Cruising speed - 18 September 2014
The New Zealand economy's upturn slowed in the June quarter, but only to a more sustainable pace. And while global conditions have made life harder for exporters, the domestic economy is still powering ahead.

NZ current account review, Q2 2014 - The best of times - 17 September 2014
The annual current account deficit narrowed further to 2.5% of GDP as expected. But on a quarterly basis the tide has already turned, and falling commodity prices will see the deficit widen again over the next year.

Fortnightly Agri Update - 17 September 2014
The latest developments in New Zealand's agri markets.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 16 September 2014
This month Home Truths takes a closer look at the housing market, casting doubt on the popular perception that the market is slowing.

RBNZ Monetary Policy Statement, September 2014 - A change of mood - 11 September 2014
While the economy remains in good form, the RBNZ has altered its judgements around how this will translate into inflation pressures, in light of recent weak inflation outturns. Consequently, the message on interest rates is low for longer, but still up over time.

NZ GDP and Current Account preview, Q2 2014 - Foot off the accelerator - 10 September 2014
We estimate that the New Zealand economy grew by 0.7% in the June quarter, a slowdown from above-trend to around-trend growth. While conditions got tougher for the export sectors, they still fared better than during last year's drought, a condition that also points to a narrowing in the current account deficit.

Building up, not out - NZ building activity survey, Q2 2014 - 3 September 2014
The rise in June quarter building activity was modest but proved that the record increase in the March quarter wasn't a fluke. The post-quake rebuild in Canterbury remains the biggest driver, as it moves into a new phase.

Fortnightly Agri Update - 3 September 2014
The latest developments in New Zealand's agri markets.

NZ Local Knowledge - 2 September 2014
A monthly review of key activity indicators for the New Zealand economy.

RBNZ September 2014 MPS Preview - Kicking the can down the road - 2 September 2014
The RBNZ will probably continue with its current "pause" phase for the OCR, but it will also reiterate its overarching expectation that the OCR will rise to more normal levels over the years ahead. However, with an election looming just nine days after this MPS, the RBNZ is likely to take a softly-softly approach in its communications.

One last hurrah - NZ Terms of Trade, Q2 2014 - 1 September 2014
The sharp drop in export prices this year is starting to show through in the terms of trade, although the June quarter figures were salvaged by an even larger fall in import prices.

Fortnightly Agri Update - 20 August 2014
The latest developments in New Zealand's agri markets.

NZ Pre-Election Fiscal and Economic Update - Slim Pickings - 19 August 2014
Treasury’s latest update of its fiscal and economic forecasts contained few surprises.  Slight downgrades to revenue projections mean the Treasury is now expecting smaller surpluses in 2014/15 and beyond, giving any future Governments less wriggle room for new spending plans. While we agree with the broad thrust of Treasury’s economic forecasts, we anticipate an economic cycle of greater amplitude.

Mid-year cheer - NZ Retail sales review, Q2 2014 - 14 August 2014
Retail sales growth picked up the pace again in the June quarter, rising 1.2%.The rebound was stronger than expected, and matches other evidence that the consumer sector has perked up again after a slow start to the year. For the Reserve Bank, this reinforces the medium-term case for more OCR hikes, but is unlikely to cause it to rethink its current ‘on pause’ mode.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 14 August 2014
This month Home Truths recaps why we expect the housing market to stage a brief resurgence this year before a more pervasive downturn ensues.

Warming up - NZ labour market review, Q2 2014 - 6 August 2014
The upswing in the New Zealand economy has continued to chip away at the unemployment rate, which fell to a five-year low of 5.6% in the June quarter. However, the latest figures also cast some doubt on the economy's capacity to grow without rising inflation.

Fortnightly Agri Update - 6 August 2014
The latest developments in New Zealand's agri markets.

NZ Local Knowledge - 6 August 2014
A monthly review of key activity indicators for the New Zealand economy.

On the job - NZ labour market preview, Q2 2014 - 30 July 2014
We expect a continuation of the recent strong jobs growth over the June quarter. But against a backdrop of high labour force participation and low inflation outturns, we expect wage pressures to remain subdued.

RBNZ OCR Review, July 2014 - The tortoise versus the hare - 24 July 2014
As expected, the RBNZ raised the cash rate for a fourth time to 3.50%, and signalled a pause to assess the impact of the hikes to date. We expect this pause to last until next January. An extended pause will be a challenge from a communication point of view; we suspect that markets will overreact to this signal, which could lead to an unintended drop in mortgage rates.

RBNZ July 2014 OCR Preview - Cat among the pigeons - 17 July 2014
Recent weak data has created some uncertainty about the New Zealand OCR outlook. However, we believe the RBNZ will persist with its planned 25 basis point hike at next week's OCR Review. The accompanying press release will reiterate the RBNZ's broad plan to lift the OCR substantially over the coming two years. However, the RBNZ will probably also announce a brief pause in the hiking cycle beyond July. We now expect the pause will last until January 2015.

Food for thought  - NZ Consumer Price Index review, Q2 2014 - 16 July 2014
On balance today's inflation report represents a small downside surprise to the Reserve Bank. Taken in combination with recent signs that domestic economic growth is slowing, tumbling dairy and log prices, and the stubbornly high exchange rate, the Reserve Bank is probably reconsidering how many OCR hikes will be necessary over the next two years. We will write more on the Reserve Bank’s reaction to this run of weak data later this week.

Fortnightly Agri Update - 16 July 2014
The latest developments in New Zealand's agri markets.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 15 July 2014
We can finally confirm the notion that the NZ housing market is going through a modest recovery at present. However, we believe this market revival will be short-lived.

Approaching target - NZ Consumer Price Index preview, Q2 2014 - 10 July 2014
We expect annual inflation to rise to 1.8% in the June quarter, which would be the highest since December 2011. With the economy now running at above-trend growth, the Reserve Bank will be alert to any signs that inflation pressures are becoming more widespread.

End of the golden weather - NZ Quarterly Survey of Business Opinion, Q2 2014 - 8 July 2014
New Zealand's economic upturn is starting to look more mature, with conditions for growth remaining positive but past their best. Meanwhile, the long-expected reawakening of  inflation pressures is becoming more of a reality.

NZ Local Knowledge - 4 July 2014
A monthly review of key activity indicators for the New Zealand economy.

Fortnightly Agri Update - 2 July 2014
The latest developments in New Zealand's agri markets.

Hot in the city - NZ Employment Confidence Index, Q2 2014 - 30 June 2014
Households' perceptions of the labour market continued to improve in the June quarter, with jobs becoming less difficult to find.

Economic confidence declines in most regions - NZ Regional Economic Confidence, Q2 2014 - 24 June 2014
Regional economic confidence remains in optimistic territory throughout New Zealand. However the degree of optimism has faded in most regions.

Mr Consistency - NZ GDP review, Q1 2014 - 19 June 2014
The New Zealand economy grew by 1% in the March quarter, more or less the same pace as in the previous two quarters. Continued above-trend growth reinforces the Reserve Bank's decision to start returning interest rates to more normal levels.

Good news all around - NZ current account review, Q1 2014 - 18 June 2014
Strong export volumes and record prices helped to narrow the current account deficit to 2.8% of GDP in the year to March, as expected.

Fortnightly Agri Update - 18 June 2014
The latest developments in New Zealand's agri markets.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 16 June 2014
House price inflation is slowing, though the latest figures provide mixed messages as to how much. But they are clearly inconsistent with migration flows being the dominant driver of housing demand.

Unbowed - NZ Consumer Confidence, Q2 2014 - 16 June 2014
Consumer confidence has edged lower, but remains near nine-year highs. While there was a drop in economic optimism, the survey showed little impact so far of rising interest rates.

Now for the tough choices - RBNZ Monetary Policy Statement - 12 June 2014
The RBNZ raised the cash rate to 3.25% today, and largely reiterated the path for interest rates that it laid out in March. We expect a fourth consecutive OCR hike at the July review. But with 75bp of tightening already under the RBNZ's belt, each subsequent decision becomes more data-dependent.

Better and better - NZ GDP and Current Account preview, Q1 2014 - 11 June 2014
Our long-running themes of surging construction activity and improved export performance were in full force in the March quarter, driving an expected 1.2% rise in GDP and a narrowing of the current account deficit to 2.8% of GDP.

NZ Local Knowledge - 10 June 2014
A monthly review of key activity indicators for the New Zealand economy.

Herding cats - RBNZ Monetary Policy Statement Preview - 5 June 2014
We expect another 25 basis point hike in the OCR to 3.25% next week. Developments since March will have prompted the Reserve Bank to trim its interest rate projections a little, but by nowhere near as much as market pricing has pulled back in recent weeks.

Everything is awesome - NZ building activity survey, Q1 2014 - 4 June 2014
Building activity surged 16% over the March quarter, a much stronger than expected catch-up after some surprisingly flat outturns over 2013. The post-quake rebuild in Canterbury continues to power ahead, and housing construction has also risen strongly in Auckland. We'll update our Q1 GDP forecast next week, but today's release presents a substantial upside risk to our forecast of 1.1% growth.

Fortnightly Agri Update - 4 June 2014
The latest developments in New Zealand's agri markets.

High tide mark - NZ Terms of Trade, Q1 2014 - 3 June 2014
The terms of trade rose further in the March quarter, to reach its highest level in more than 40 years.

Fortnightly Agri Update - 21 May 2014
The latest developments in New Zealand's agri markets.

NZ Budget 2014: Loosening the purse strings - 15 May 2014
Comprehensive coverage of the New Zealand Government's Budget 2014.

First Impressions: Budget 2014 - A loosening of the purse strings - 15 May 2014
The highlight of Budget 2014 was a notable increase in the spending allowance compared to recent years. The Government remains on track for a surplus in 2015 but projected surpluses in following years are substantially smaller. The projected spending changes are not significant enough to alter our growth or interest rate forecasts.

No longer in the driver's seat - NZ retail sales, Q1 2014 - 14 May 2014
Retail sales growth slowed more than expected in the March quarter, to 0.7%. On its own this suggests modest downside risk to our forecast for 1.1% GDP growth. More broadly, the data support our view that consumer spending is becoming less of a tailwind for economic growth, as interest rates rise and the housing market slows.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 14 May 2014
We now have clarity on house prices and the RBNZ's LVR restrictions. But the state of market turnover is less clear.

Lucky Dip - NZ 2014 Budget Preview, May 2014 - 12 May 2014
Finance Minister Bill English is likely repeat familiar cautious rhetoric when he unveils the 2014 Budget on Thursday. An upgrade to GDP growth forecasts should see the Government’s books looking in better shape than at the December update. This should leave room for both maintaining fiscal discipline and funding modest new spending initiatives beyond 2015.

Change of RBNZ call - 8 May 2014
We now expect the RBNZ will leave the OCR on hold in July, and will instead hike in September.

Worker uprising - NZ labour market review, Q1 2014 - 7 May 2014
New Zealand's economic upswing generated another quarter of strong jobs growth, but also a further lift to record levels of labour force participation. That's meant a less capacity-constrained economy than we might have expected, but it's also acted to suppress wage growth.

Fortnightly Agri Update - 7 May 2014
The latest developments in New Zealand's agri markets.

Help wanted - NZ labour market preview, Q1 2014 - 1 May 2014
Employers are now firmly in expansion mode as the economy picks up momentum. We're expecting the March quarter unemployment rate to drop to 5.8%, which would be a five-year low. Wage growth may also tick higher again, though not dramatically so given that annual inflation remains subdued.

Credit Check - 1 May 2014
This Credit Check takes a look at how the RBNZ's high-LVR lending restrictions have been performing, and how they might evolve from here.

Sensibly modest - NZ Labour Party monetary policy proposals - 29 April 2014
We provide our first thoughts on the Labour Party's proposed changes to New Zealand's monetary policy regime.

Variations on a theme: April 2014 OCR Review - 24 April 2014
As expected, the Reserve Bank lifted the OCR from 2.75% to 3.00%, reiterated that further hikes lie ahead, but mentioned the uncomfortably high exchange rate.

Easter, but no surprise: RBNZ OCR Review, April 2014 - 17 April 2014
We expect the Reserve Bank will lift the OCR from 2.75% to 3.00% and will signal more to come. But the tone will be more cautious than the March MPS.

Zig-zag - NZ Consumer Price Index review, Q1 2014 - 16 April 2014
The annual inflation rate flipped lower in the March quarter after two straight increases. Our view remains that inflation will head gradually higher over the next couple of years, but lower inflation today, combined with a higher NZD and lower dairy prices, will reduce the degree of urgency for OCR hikes.

Fortnightly Agri Update - 16 April 2014
The latest developments in New Zealand's agri markets.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 14 April 2014
While different measures of house prices are telling radically different stories, the true trend is elusive.

More of the same - NZ Consumer Price Index preview, Q1 2014 - 10 April 2014
We expect annual inflation to hold at 1.6% for the March quarter, with prices creeping up across a wide range of categories but slowing for food. Our estimate is a touch below the Reserve Bank's forecast, but not enough to alter the near-term outlook for interest rates.

Power shift - NZ Quarterly Survey of Business Opinion, Q1 2014 - 8 April 2014
Businesses remain at their most upbeat in decades, with that confidence now extending to an expectation that firms will be able to lift their prices and margins in coming months. The question is whether they will be able to do so; reported price increases to date have been more modest and the high NZ dollar remains a headwind.

Fortnightly Agri Update - 2 April 2014
The latest developments in New Zealand's agri markets.

That's more like it - NZ Employment Confidence Index, Q1 2014 - 31 March 2014
After a substantial delay, the labour market now is joining in the economy's general upturn. Households' perceptions of the labour market are now at their strongest since 2008, though they remain markedly weaker than they were before the recession.

Where should we build now? Housing supply and the construction outlook in regions of New Zealand - 26 March 2014
By calculating the number of people per house in regions of New Zealand, we gain insights into the likely trajectory and locus of construction activity in New Zealand ex Canterbury.

The bright side of life - NZ Regional Confidence, Q1 2014 - 24 March 2014
Economic confidence in Canterbury remains the highest in the country with confidence falling in just two regions. And with economy continuing to strengthen, optimists now outnumber pessimists in all regions for the first time since late 2009. There were sharp improvements in confidence in Otago and Northland this quarter, while confidence remains high in regions where the dairy industry plays an important role.

No alarms and no surprises - NZ GDP review, Q4 2013 - 20 March 2014
The 0.9% rise in December quarter GDP was bang in line with expectations. Stripping out the impact of the drought and the subsequent rebound, the New Zealand economy was consistently growing at an above-trend pace over 2013, reinforcing the case for interest rates to return to more normal levels.

Hey big earner - NZ current account review, Q4 2013 - 19 March 2014
New Zealand received a sharp boost in export income over the December 2013 quarter, with volumes rebounding from drought-depressed levels and prices remaining very high. The current account deficit remains benign for now but is expected to widen again from late 2014 as demand for imports grows.

Fortnightly Agri Update - 19 March 2014
The latest developments in New Zealand's agri markets.

Riding on the coattails - NZ Consumer Confidence, Q1 2014 - 17 March 2014
Consumer confidence has risen to its highest level since 2005, on the back of economic optimism near record levels. Consumers’ sentiment about their own finances is also improving, as is their willingness to spend, though both are still well below previous cycle highs.

Better times - NZ GDP and Current Account preview, Q4 2013 - 14 March 2014
We anticipate more strong numbers to round out the 2013 year, with the effects of the short but severe drought in early 2013 finally washing out of the national accounts figures.

The first of many: RBNZ Monetary Policy Statement - 13 March 2014
The Reserve Bank lifted the OCR from 2.5% to 2.75%, and signalled more to come.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 11 March 2014
Further evidence that the housing market is slowing in the face of higher interest rates and the RBNZ's restrictions on high-LVR mortgage lending.

This is it - RBNZ Monetary Policy Statement Preview - 6 March 2014
The Reserve Bank is widely expected to lift the OCR by 25bp to 2.75% next Thursday, as it starts to head off the inflation pressures generated by the strengthening economy and the Canterbury rebuild. While the RBNZ doesn't appear to be in danger of falling behind the curve, its economic projections won’t leave much room for dallying. We expect the statement to signal that follow-up hikes over the next few OCR review dates are highly likely.

Down tools - NZ building activity survey, Q4 2013 - 5 March 2014
The volume of building work put in place fell 1% in the December quarter, with a smaller than expected lift in housing construction failing to offset an expected drop in non-residential work. The post-quake rebuild in Canterbury is progressing, and housing construction is picking up in Auckland, but the trend elsewhere remains subdued. While some of the shortfall in today's survey is more likely to be a timing issue than anything fundamental, we have revised down our estimate of December quarter GDP growth from 1.1% to 0.9%.

Fortnightly Agri Update - 5 March 2014
The latest developments in New Zealand's agri markets.

Reach for the stars - NZ Terms of Trade Review, Q4 2013 - 3 March 2014
NZ’s terms of trade remain at a 40 year high after rising further in the December quarter. Export prices are lingering at high levels, with the added boost to the terms of trade in the December quarter largely due to softer import prices. Today's data also showed a big jump in export volumes, largely reflecting stronger dairy exports as the sector rebounded from the effects of last summer’s drought.We think the terms of trade will moderate over the course of 2014, but remain bullish about the outlook for New Zealand’s terms of trade over a medium term horizon.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 20 February 2014
The housing market is now firmly in slowdown mode.

Fortnightly Agri Update - 19 February 2014
The latest developments in New Zealand's agri markets.

Solid but not spectacular - NZ Retail Sales Review, Q4 2013 - 17 February 2014
Retail sales rebounded less strongly than expected in the September quarter, suggesting some donwside risk to our forecast for a 1.1% lift in GDP in the quarter. The details showed decent momentum in discretionary spending, but slower housing-related spending. A strong NZ dollar may also have hit turnover for some local retailers.

Pitching in - NZ labour market review, Q4 2013 - 5 February 2014
New Zealand's unemployment rate continued to fall in the December 2013 quarter, with employment growing strongly and labour force participation reaching near-record highs. However, the details weren't emphatically positive; weakness in hours worked suggests some downside risk to near-term GDP, and wage growth remains subdued.

Fortnightly Agri Update - 5 February 2014
The latest developments in New Zealand's agri markets.

Steady progress - NZ labour market preview, Q4 2013 - 31 January 2014
Labour market indicators point to a modest fall in the unemployment rate to 6.1% in the December 2013 quarter. It's not unusual for the labour market – and particularly wages – to remain subdued even at this stage of an economic upturn, but we expect a more substantial improvement to emerge over the course of this year.

Steady hand: RBNZ OCR Review - 30 January 2014
As expected the RBNZ to left the OCR at 2.5% and clearly signalled its intention to hike in March. This portrays a central bank that is calmly preparing for a steady OCR hiking cycle.

Curtain raiser: Preview of RBNZ OCR Review - 23 January 2014
We expect the RBNZ to leave the OCR at 2.5%, and to clearly signal its intention to hike in March.

Fortnightly Agri Update - 22 January 2014
The latest developments in New Zealand's agri markets.

Cat among the pigeons - NZ Consumer Price Index review, Q4 2013 - 21 January 2014
Consumer prices recorded a surprise increase in the December 2013 quarter, lifting annual inflation to 1.6%. A strengthening economy, a buoyant housing market and rising construction costs will push the Reserve Bank into raising interest rates this year.

Home Truths: Westpac's monthly analysis of the New Zealand housing market - 21 January 2014
There is no doubt about it. The New Zealand housing market is slowing.

Measured progress - NZ Employment Confidence Index, Q4 2013 - 20 January 2014
Households' perceptions of the labour market improved in the December quarter, although the availability of jobs remains well below par. Expectations of future earnings growth have further subsided, which may be a legacy over low inflation over the last year.

Waiting in the wings - NZ Consumer Price Index preview, Q4 2013 - 16 January 2014
Lower fuel prices and a strong New Zealand dollar helped to restrain inflation to an estimated 1.4% in the year to December. Home-grown inflation pressures are picking up as the economy accelerates, but in the absence of a substantial upside surprise in next week's CPI figures, we expect that the Reserve Bank will be able to carry through with its signalled intention to start raising rates in March.

The next step - NZ Quarterly Survey of Business Opinion, Q4 2013 - 14 January 2014
Business sentiment has risen sharply over the last year, and with demand picking up, firms' expansion plans are the strongest in two decades. Home-grown inflation pressures are likely to follow in time, justifying the Reserve Bank's plan to begin raising interest rates early this year.

In-depth review of topical issues.

Deeper insights

  • Great expectations - What drives the New Zealand dollar - 2 October 2014
    The latest developments in New Zealand’s agri markets.
  • NZ labour force participation - In or out - 9 September 2014
    New Zealand's labour force participation rate has risen sharply in the last two decades to become one of the highest in the OECD. We show that this outperformance has been driven by older people, with New Zealand's retirement policies minimising the disincentive to working later in life. Our view is that the trend toward later retirement will continue to head off the effects of an ageing workforce for another couple of years.
  • New Zealand's neutral OCR: a moving feast - 22 October 2013
    The neutral OCR will be a crucial determinant of the peak of the upcoming OCR hiking cycle. Neutral may be around 4.5% today, but there are strong reasons to expect it will rise over the coming few years. This short bulletin explains why we think neutral will reach 5%.
  • Eye on the horizon - longer-term economic forecasts for New Zealand - 17 October 2013
    We are often asked for our longer-term economic forecasts. In this bulletin we respond to those requests by extending our forecasts out to 2023. We begin by briefly describing how we expect the current cycle to play out. We then outline our key longer-term assumptions.
  • Sleeping beauty is awake - an update on the NZ tourism sector - 24 September 2013
    A review of the recent history and near-term prospects of New Zealand's tourism industry.
  • Lowering the boom - RBNZ restricts high-LVR lending - 20 August 2013
    The RBNZ has brought its macroprudential toolkit into action, setting limits on the share of high loan-to-value ratio mortgages. We expect an initial 'sticker shock' for the housing market, but a limited impact over the longer term; interest rates are the main determinant of housing demand.
  • Hair of the Dog - 10 June 2013
    In this article we explain why we expect New Zealand's rising housing market to boost household spending.
  • Drought, Chinese Mums, and the price of milk - 16 April 2013
    We take a look at the unexpected consequences of the 2013 New Zealand drought
  • Where should we build? 19 March 2013
    A look at housing supply and the construction outlook in all regions of New Zealand except Canterbury. 
  • Tool time - 4 March
    A first look at the Reserve Bank's suite of macroprudential policy tools - their purpose, the options, and when they might first be used.
  • A season of two halves - 1 March 2013
    A primer on dry weather in New Zealand
  • Realities of NZD intervention - 22 February 2013
    All you need to know about the Reserve Bank's approach to exchange rate intervention.

  • When rising tides don’t lift all boats - 20 February 2013
    Household Income Growth since 2008
  • President Obama and the Fiscal Cliff - 12 November 2012
    Without an agreement over the fiscal cliff, the US is facing a potential 4ppt reduction in net government spending in FY2013 that would almost surely result in a recession.
  • Gentlemen's agreement - 18 September 2012
    Incoming RBNZ Governor Graeme Wheeler is due to sign a new Policy Targets Agreement soon. We don't expect substantial changes to the document, which covers only a narrow aspect of the Governor's role - but bigger changes could be on the way in coming years.
  • Delever me? - 11 September 2012
    A closer look at the drivers of household debt. We conclude debt is likely to stay historically high, but grow more slowly than last decade.
  • Save us! - 20 August 2012
    We review the evidence on New Zealand's saving performance and conclude it's probably not been as dire as official measures suggest.
  • Rebuilding a City - 16 August 2012
    Here we collate some of the available evidence to build a picture of how the local economy and the rebuild are progressing.
  • Eurogeddon - 3 July 2012
    An investigation into what would become of New Zealand in a scenario of financial meltdown in Europe.
  • New man at the helm - 26 June 2012
    Graeme Wheeler has been appointed Governor of the Reserve Bank of New Zealand, effective 25 September.
  • Nice for now - 27 March 2012
    The New Zealand housing is resurgent for now, but the cheer may not last.
  • Three points of a triangle - 19 March 2012
    The debate on New Zealand interest rates has fractured into three points of a triangle. This could throw up interesting scenarios in the year ahead.
  • Time to fix - 2 March 2012
    The balance of risks for mortgage borrowers now favours fixing.
  • Changing the watch - 1 February 2012
    Prospects for the RBNZ as Governor Alan Bollard announces he will step down in September.
  • The construction sector: past, present and future - 14 December 2011
    The construction sector has been a notable area of weakness in the New Zealand economy over the last few years, however we expect a significant turnaround in fortunes ahead, driven by building in Auckland and Canterbury.
  • Hold your horses - 9 December 2011
    Our model predicts the NZD/AUD exchange rate will eventually rise to a more normal level, but not before global credit conditions improve.
  • The turning Tide - 23 November 2011
    An analysis of trans-Tasman migration and how it relates to Australian and NZ unemployment.
  • Digesting Dairy Prices - 18 August 2011
    A discussion of the outlook for dairy prices in an uncertain world.
  • Ear to the ground - 10 August 2011
    Anecdotes about the rebuild from Christchurch
  • US Fiscal Folly - 4 August 2011
    US lawmakers dodge a self-inflicted crisis, but do little to address the fiscal malaise that affects all levels of Government.
  • Disasters in history - 8 July 2011
    A review of the lessons from the Napier, Kobe and Chile earthquakes, as well as Hurricane Katrina.
  • A matter of Exchange - 24 June 2011
    We review the links between saving, interest rates, and the exchange rate, and interrogate some dubious claims.
  • Forestry Sector Overview - 10 June 2011
    An overview of one of New Zealand's key primary industries including a discussion of the differing fortunes of forest growers and wood processors.
  • Shape of things to come - 7 March 2011
    Discusses how the Christchurch Earthquake has radically altered the New Zealand's economic outlook
  • Why so glum? - 15 December 2010
    Global financial stress has been a key driver of the low NZD/AUD exchange rate since 2009.
  • Raising interest - 28 September 2010
    Investigates the responsiveness of retail bank deposits to interest rates.
  • Shaky Isles - 6 September 2010
    Assessment of the possible impact of the September 2010 Canterbury earthquake.
  • Crossing the line - 23 August 2010
    NZD/AUD exchange rate model update
  • Being effective - 17 August 2010
    The last of our series on the interest rate landscape shows that borrowing costs have continued to ease even without RBNZ action.
  • Neutral about neutral - 16 August 2010
    The third instalment in our series on the new interest rate landscape discusses the neutral OCR, a concept that proves surprisingly elusive.
  • A matter of interest - 12 August 2010
    The second of our series on the new interest rate landscape, we trace through six important flow-on effects from higher bank funding costs.
  • Before and after - 9 August 2010
    In the first of a series on the new interest rate landscape, we review how bank funding has been affected by the Global Financial Crisis.
  • House prices - further to fall - 2 July 2010
    We believe house prices have further to fall, not least because of a change to the rate of income tax which has reduced the tax incentive to invest in rental property.
  • Ease the squeeze, please - 25 June 2010
    New Zealand is building too few houses to keep up with population growth – a housing squeeze lies ahead.
  • The big GST step - 12 February 2010
    Tax reforms should provide improved incentives over the longer term, but not without sizeable disruptions at the time of implementation.
  • Sectoral performance - 15 January 2010
    Winners and losers in the recession and recovery.
  • Tax and house prices - 16 December 2009
    Changes to the tax system are likely to reduce house values.
  • Split fortunes - 4 December 2009
    Manufacturers have been squeezed by rising costs and a strong NZ dollar. An improving world economy will help some sectors, but non-food manufacturing will continue to lag.
  • This time is different - 25 November 2009
    Eight decades of recoveries.
  • Housing encore - 12 November 2009
    Update on the New Zealand housing market.
  • Buffet or buffer - 24 September 2009
    Does the exchange rate hinder or help commodity exporters?
  • No need to get cross - 15 September 2009
    NZD/AUD model update.
  • Getting more for your money - 20 August 2009
    Consumers weren’t the only party animals this decade – a stronger terms of trade underpinned spending and borrowing across all sectors.
  • Variable gravity - 20 August 2009
    Practices in the NZ housing market are vastly different to those in the US.
  • The return of HEW - 10 August 2009
    Homeowners have switched from drawing on housing wealth to accumulating it – though the pace is slowing.
  • When cash is not currency - 10 August 2009
    The relationship between the OCR and the exchange rate is not stable enough to serve as a policy lever.
  • Funding it tough - 23 June 2009
    Running the ruler over claims about bank margins in the wake of the Global Financial Crisis.
  • Flu jab - 18 June 2009
    The potential impact of an H1N1 influenza epidemic on the NZ economy.
  • Flash in the pan - 4 June 2009
    Housing pickup unsustainable
  • The money tree - 17 April 2009
    Quantitative easing: what it is, and the chances of NZ going down this path.
  • A changing climate - 4 March 2009
    New Zealand’s options for addressing climate change.


NZ Occasional Papers

NZD/AUD forecasting modelSubmission to monetary policy inquiry 2007Labour force participation in NZNZ inflation expectationsA Global Interest Rate ModelExplaining the NZ-Australian exchange rateTrans-tasman interest ratesSaving and investment in NZ

Quarterly Economic Overview

Quarterly publication providing an in-depth economic outlook, topical issues and forecasts.

  • November 2014
    A summary of the prospects for New Zealand's economy, interest rates, exchange rate and agricultural sector, plus an overview of the global economy.
  • August 2014
    A summary of the prospects for New Zealand's economy, interest rates, exchange rate and agricultural sector, plus an overview of the global economy.
  • May 2014
    As New Zealand's economic upswing rolls on, we are starting to see encouraging signs that the economy still has room to grow without generating excessive inflation. However, we still expect a substantial OCR hiking cycle over the coming three years. This year's election is a key risk event - the Special Topic this quarter provides a guide for financial markets.
  • February 2014
    The construction boom and rising house prices are now maturing themes for the New Zealand economy. This quarter, the NZ Economic Overview focusses on the causes and consequences of New Zealand's stratospheric export commodity prices.
  • November 2013
    Comprehensive analysis and forecasts of the New Zealand economy, global economy, and financial markets.
  • August 2013
    New Zealand is now clearly in the grip of a self-sustaining economic upswing, driven by construction activity and house prices. Our Economic Overview discusses the implications for interest rates while noting that the upturn will prove temporary. The remaining "forks in the road" for New Zealand include the question of Fed tapering and the possible impact of the RBNZ's new mortgage restrictions. Our expectation of a substantial OCR hiking cycle has not changed.
  • May 2013
    The New Zealand economy is caught in a tug-of-war between high GDP growth and low inflation. The May Economic Overview includes articles on the New Zealand economy, New Zealand dollar, inflation and interest rates, and the international outlook. Our new section, Agricultural Outlook, covers the impact of drought on the New Zealand economy. And our special topic discusses the Reserve Bank's macroprudential tools.
  • February 2013
    The economy is starting to move as the Canterbury rebuild hits its straps. But the stratospheric exchange rate has kept inflation in check. So the RBNZ has been able to keep interest rates low. The predictable result has been improved consumer confidence and higher house prices. Our forecasts for 2013 follow the same formula, but with greater intensity on all fronts.
  • November 2012
    After a strong start to 2012, the New Zealand economy has lost momentum, reflecting the patchiness of the current construction-led economic upturn.
  • August 2012
    Growth is accelerating but low inflation and the strong exchange rate mean interest rates will stay low for longer. This edition of the Economic Outlook discusses the possibility that rising house prices will reignite New Zealand's economic imbalances.
  • May 2012
    The global economy has cooled as expected, but the surprisingly strong NZ dollar and soft inflation point to low interest rates for a while longer.
  • February 2012
    Export conditions are deteriorating, but we envisage a dip rather than a disaster. Low interest rates will boost the housing market.


Quarterly focus on rural developments, trends and outlook.

  • January 2013
    In this quarter’s Agribiz, we look at why lamb prices fell hard over 2012 while beef prices remained at near record highs, and take a look at the prospects for rural land market.
  • October 2012
    In this quarter’s Agribiz we look at some of the risks higher global food prices bring for the global economy, and investigate what impact higher grain prices might have on prices of key New Zealand exports such as meat and dairy.
  • July 2012
    In this quarter’s Agribiz we examine recent moves in dairy prices and look at what the outlook might be from here.
  • April 2012
    In the April Agribiz, we shine a spotlight on recent developments in the meat sector.
  • January 2012
    The international outlook remains stormy, and in this quarter's Agribiz we take a closer look at what this might mean for interest rates and the NZD.

Consumer Confidence

Quarterly survey on consumer activity, spending and expectations of the current economy.


Employment Confidence

Quarterly survey on employer activity, spending and expectations of the current economy.


Regional Economic Confidence

Quarterly survey on regional employer activity, spending and expectations of the current economy