21 Nov 2017

Westpac pares back growth expectations

1:30 pm on 21 November 2017

Uncertainty about the new government and a fall off in immigration and housing will slow economic growth, Westpac Bank predicts.

Nineteen Westpac branches could be set to close

Westpac Bank Photo: RNZ / Claire Eastham-Farrelly

Westpac Bank said growth would be slower than previously thought and its latest outlook is now forecasting 2.4 percent growth for 2018, rising to 3.2 percent in 2019.

Chief economist Dominick Stephens said conditions were changing, partly because of the new government.

"Key drivers from recent years, such as high population growth and rising house prices, are dissipating."

"(The) government's plans to increase spending will certainly boost the economy, but plans to dampen the housing market and net migration will have the opposite effect, tending to slow the economy," he said.

Mr Stephens said those competing forces would broadly balance one another out.

Westpac is still picking the Reserve Bank will keep the Official Cash Rate at its record-low 1.75 percent until late 2019.

It expects net migration to fall from the current level of about 70,000 to 10,000 by 2021 because of tougher rules and a natural slowdown.

House prices are expected to fall by about 5 percent over the coming years, because of measures to cool the market and rising mortgage rates.

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