13 Apr 2018

Informetrics lowers economic growth forecast

4:34 pm on 13 April 2018

Economic forecaster Infometrics has markedly lowered its forecasts for economic growth - ironically because government policies aimed at boosting growth are likely to create short-term headwinds.

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Infometrics expects the economy to grow by 2.4 percent by the end of the year and falling below 2 percent in 2019, which compared with previous forecasts of around 3 percent.

It said the economy was going through a transition and in the short term that would slow growth.

Infometrics chief forecaster Gareth Kiernan said the Labour-led government had different spending priorities to National and that was where the slowdown would occur.

"With Labour turning its attention to public transport and rail projects in particular, a lot of those are going to take time to go through planning and design ... there's not going to be a lot of infrastructure spending in that space and it's going to be a couple of years before we see the spending," he told RNZ Business.

There was already a slowing of the economy from reduced immigration and that would be flow through to housing, along with uncertainty over some policies, he said.

Mr Kiernan said the government also had little financial room to spend on stimulatory policies and that would put pressure on Finance Minister Grant Robertson's commitment to stick within tight spending limits and reducing net debt to 20 percent of gross domestic product by 2022.

"I think from a financial market point of view, and the ratings agencies wouldn't be too concerned if that timeline was to slip a little."

There was no suggestion the economy would fall into recession, but a slowdown was to be expected with falling immigration, an ageing population, difficulties in finding enough workers for key sectors, and a government constrained in what it could spend would add to that, he said.

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