NZ economy finely balanced

The BusinessNZ Planning Forecast indicates a finely balanced New Zealand economy, with positive economic data, but with some risks remaining.

Improved business and consumer confidence, solid growth prospects among New Zealand’s major trading partners, and firm international commodity prices augur well for future growth, says BusinessNZ economist John Pask.

However, risk factors include the ongoing drought which could reduce GDP by as much as $2 billion, and household debt levels that have risen in an environment of low interest rates.

Some regulatory issues are also risk factors.

“Proposals for new earthquake strengthening standards for buildings are an example of a regulatory approach that could have severe outcomes for the economy.   The proposals exhibit poor process with incomplete analysis of the costs of the intended legislation,” Mr Pask said.

“Other aspects of the regulatory environment, such as local government’s slowness in freeing land supply to allow for more affordable housing, and ongoing exorbitant development contribution charges also cause concern.”

The BusinessNZ Planning Forecast incorporates BusinessNZ’s Economic Conditions Index (ECI) which tracks 33 indicators, including GDP, export volumes, commodity prices and inflation, debt and confidence figures.

The ECI sits at 18 for the March quarter, up 3 on the previous quarter and up 16 on a year ago.

The BusinessNZ Planning Forecast for the December 2012 quarter is here on www.businessnz.org.nz