The economy is expected to gain momentum later this year, even as inflation and unemployment tick higher, according to Westpac economists, RNZ reported.
In its latest economic outlook, the bank says strong agricultural exports, a lift in household spending from lower interest rates, and easing global trade tensions will help drive the rebound.
Chief economist Kelly Eckhold said the June quarter likely marked a pause in growth, but the slowdown would be temporary, reports RNZ.
According to RNZ, Eckhold said “Households are starting to benefit as mortgages are refinanced at much lower rates, rural incomes are being boosted by high export prices, and government investment incentives are encouraging businesses to spend”.
He added that the international picture was brighter than feared earlier this year when the US announced its “Liberation Day” tariffs. While New Zealand faces a 15 per cent tariff, Eckhold said it was “disappointing but manageable,” with the US likely to bear the biggest cost.
Westpac expects dairy and meat prices to stay strong, tourism numbers to improve, and domestic demand to strengthen in the months ahead. Inflation is forecast to push towards the top of the Reserve Bank’s 1–3 per cent target range, while unemployment will edge higher before easing again by year-end.
House prices are tipped to rise 3–4 per cent this year and 6 per cent next year. The bank also expects the government to maintain tight fiscal control as it aims for a return to surplus by 2028/29.
Eckhold said the Reserve Bank would likely make one final 25 basis point cut to the official cash rate next week, bringing it to 3 per cent, before stepping back from further reductions.
“It’s probable that 3 per cent will mark the low point in the current cycle, provided that activity picks up as expected,” he said. “The real question now is how quickly the recovery takes hold,” reports RNZ.
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