A raft of negative factors are set to take the shine off the economy in the near term prolonging pressure on households and businesses, according to Westpac economists.<\/p>\n
The bank has revised down several of its near term forecasts, particularly inflation.<\/p>\n
The recent surge in fuel prices, higher interest rates, the weak New Zealand dollar, continued high unemployment, and a weak housing market are all seen weighing on the economy.<\/p>\n
Westpac chief economist Kelly Eckhold said an expected dip in the inflation rate to 3.7 percent in the three months ended September would be short lived.<\/p>\n
“The main driver of this revision are sharply higher global fuel prices, compounded by a more than 4 percent fall in the New Zealand dollar since the start of September.”<\/p>\n
The new forecast is for inflation to end the year at 4.2 percent, with gradual declines towards the Reserve Bank’s 2 percent target through next year.<\/p>\n
Households are also expected to do it tougher not just from fuel prices, but also the weak housing market and higher interest rates.<\/p>\n
Eckhold said an expected stabilisation of the housing market in the second half the year had not happened, with sales volumes weakening, and houses taking longer to sell.<\/p>\n
He said it now expected the market to have fallen 1.4 percent this year.<\/p>\n
“The combination of high fuel costs and a weak housing market will likely crimp consumer demand running into Christmas.”<\/p>\n
That weaker spending led to a trimming of growth forecasts, although they are picking growth of 2.5 percent this year, rising to 3 percent in 2027.<\/p>\n
“The large rise in long term interest rates may be relevant for 2027 growth trends.”<\/p>\n
“The election outcome introduces two-sided risks to the 2027 growth outlook that are hard to quantify at this early stage,” Eckhold said.<\/p>\n
For now, Westpac held its Reserve Bank forecast of the official cash rate (OCR) being held steady at 2.75 percent this month, with a 25 basis point rise in December, and two further rises in early 2027.<\/p>\n
“The OCR increases that have occurred to date, and the one further expected increase in December will position the MPC (monetary policy committee) well to respond to conditions in 2027 as they unfold.”<\/p>\n","protected":false},"excerpt":{"rendered":"A raft of negative factors are set to take the shine off the economy in the near term…\n","protected":false},"author":2,"featured_media":624984,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-624983","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/624983","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=624983"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/624983\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/624984"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=624983"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=624983"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=624983"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}