The latest NZIER Consensus Forecasts shows forecasters have pared back growth expectations slightly since the March quarter survey. Activity indicators over the past quarter have been mixed, with global dairy prices continuing to fall but household spending remaining strong.
Despite the slightly weaker expectations for the New Zealand economy, growth is still expected to be fairly solid out to 2018. Forecasters expect growth of 3.3% in the March 2015 year, moderating to 2.8% and 2.7% in the following two years. Strong residential construction was a key contributor to GDP growth over 2014, driven by house-building demand in Canterbury and Auckland.
While forecasters have wound back the extent of residential construction growth expected over 2016 and 2017, the level of activity is still expected to be very elevated. A further ramp-up in house-building in Auckland will offset the reduced growth impetus as the Canterbury rebuild nears completion. The labour market is one particularly positive story. Forecasters expect a further strengthening in employment demand to reduce the unemployment rate to close to 5% in 2017.