New Zealand Q4’18 GDP likely to rise 0.3 pct q/q, lower than RBA’s forecast: Westpac Research

New Zealand’s gross domestic product (GDP) for the fourth quarter of last year is expected to rise 0.3 percent q/q, less than market expectations or the Reserve Bank’s forecast, according to the latest report from Westpac Research.

There seems to have been a genuine slowdown in growth over late 2018, though it was exacerbated by some temporary disruptions in the energy sector.

Both the New Zealand and Australian economies have slowed in recent times, but for different reasons. Household spending and construction were highlights for New Zealand in the December quarter.

Meanwhile, the current account deficit (Wednesday) is set to widen further to 3.9 percent of GDP, which would be the largest deficit in six years, the report added.

Westpac’s forecast of GDP growth looks to be at the low end of the range of market forecasts, and is substantially less than the 0.8% rise that the Reserve Bank forecast in its February Monetary Policy Statement (which we noted at the time was too optimistic).

The next Official Cash Rate review on March 27, shortly after the GDP figures, will have to acknowledge that the balance of developments since February has been to the downside.

"We expect the annual current account deficit to widen to 3.9 percent of GDP, a six-year high. The terms of trade fell over 2018 and import volumes have remained strong," the report further commented.