NZ: GDP supported by robust population growth – Westpac

New Zealand’s Q1 GDP result disappointed the expectations of the RBNZ and the market as headline growth remains strong, but this has been supported by robust population growth, explains the analysis team at Westpac.

Key Quotes

“This population growth and increased availability of labour has also restrained wage pressures. That said, consumer sentiment and agri outlook is supportive, although housing remains a risk.”

“RBNZ’s June MPS kept the OCR on hold at 1.75%, maintained a neutral bias, and repeated the message that the OCR is likely to remain on hold for a long time. RBNZ was less dovish than feared and while they acknowledge the fiscal stimulus, we forecast OCR on hold until early 2019. Markets remain too optimistic, with hikes factored mid-2018.”

“For the NZD, fundamentals are mostly supportive. Longer term, we are more bearish, contingent on US interest rate and US dollar uptrends resuming.”