October 2020: A delicate balance (PDF 528KB)
Although the New Zealand economy has been relatively resilient through the COVID-19 crisis so far, the outlook remains highly uncertain. The downturn is still getting underway, and there is noise in the data and much still to be learned about the true state of the economy. Weighing up the outlook in the face of this uncertainty is a challenge for policy makers, businesses and households alike. But although much is unknown, there are some key features that will shape the outlook.
July 2020: Finding our way (PDF 940KB)
The New Zealand economy has been able to return to something closer to normal, but the outlook is a challenging one. Closed borders mean a smaller economy, and recessionary impacts of this are unavoidable. Households and businesses are cautious and unemployment is rising. Investment and spending will be weaker, with policy providing an important but only partial offset. The slowdown will be large and the recovery slow. We present alternative scenarios to help articulate the degree of uncertainty around our central outlook. The common thread is that risks are skewed to the downside. Given the global recessionary dynamics that are already in train, upside is limited. While there are 50+ shades of grey around the outlook, we think the implications for are actually quite binary.
April 2020: Black swan (PDF 740KB)
The world is in the midst of an unprecedented health and economic crisis. The COVID-19 pandemic is wreaking havoc on lives and livelihoods, including here in New Zealand. Unprecedented activity restrictions have been absolutely necessary, but have stopped the global economy in its tracks. The economic slump underway is truly enormous. Rightly, the crisis has galvanised policymakers with governments and central banks taking unprecedented steps to cushion the blow and ease pressures in financial markets. Nonetheless, the impacts of this crisis will be with us in months and years to come.
January 2020: Through the looking glass (PDF 988KB)
As we enter 2020, we begin the next chapter for the New Zealand economy. While capacity pressures have eased, economic momentum appears to be finding a floor, with drivers in place for gradual improvement over the next two years, despite headwinds. Housing market strength, fiscal spending, high terms of trade, the tight labour market and low interest rates are expected to provide support. We assume the coronavirus outbreak will weigh a little on our export prices and volumes in the near term, but impacts are highly uncertain at this stage. GDP growth is expected to sit around trend on average, with inflation close to target. The RBNZ can afford to be patient, waiting to see how the story unfolds. The economy is at a crossroads and the political and international context will be crucial. We see upside risk from housing and fiscal spending, but large downside risks from unforecastable global shocks, including the potential impacts of the new coronavirus.