Persevere through a flat 2024, says ASB

Ongoing strong migration and growth in some sectors have helped the New Zealand economy stay the course according to the latest ASB Quarterly Economic Forecast, but it is going to continue to be a slow grind for Kiwis over the coming months.

“It’s a matter of continuing to hunker down a little longer until interest rates ease, and consumer spending gets more puff,” says ASB Chief Economist Nick Tuffley. “The economy is expected to stay flat for the next three to six months, but there are some positive signs.

“We’re continuing to see inflation decrease slowly, now on track to fall below 3% by the end of this year and maintain our view that the Reserve Bank has finished lifting interest rates despite market speculation in February over further hikes. We expect the Reserve Bank will be comfortable to start cutting the official cash rate in November as long as various inflation gauge signal inflation will become well contained in the 1-3% target band.

“Migration flows continue with population growth hitting an annual rate of nearly 3%, the strongest since 1991, and cautious optimism in the rural industry with prices for some key commodities having rebounded and forecasts having been nudged upwards.

“That said, Kiwi households are still doing it tough with consumer spending reducing as New Zealanders tighten their purses for discretionary spending, such as recreation and liquor, in favour of experiences, like travel and accommodation.”
Despite employment levels remaining fairly flat, population growth means there will be challenges for a growing number of people seeking work.

Meanwhile, the global economic outlook remains subdued after many major global central banks tightened monetary policy.  This tightening is showing clearer signs that it is getting inflation under control, with the likelihood that some central banks cut interest rates later this year.

“Overall, there are some bright spots in the outlook and all signs are pointing to New Zealand being near the end of its tough fight to contain inflation, but the rest of 2024 will not be without its challenges for households and businesses.”

The latest ASB Quarterly Economic Forecast will be available online here.