New Zealand's economy will grow at an average rate of about 2.8 percent over the next few years on the back of population growth, construction and tourism, an independent economic think-tank forecast Wednesday.
The New Zealand economy was showing reasonable momentum, with households and businesses resilient in the face of offshore volatility earlier this year, said a report from the New Zealand Institute of Economic Research (NZIER). "Net migration has been much stronger than expected over the past year. This will boost demand across a wide range of sectors, including retail and housing," NZIER senior economist Christina Leung said in a statement.
"Meanwhile, low fuel prices and rising middle class incomes in the major economies, particularly China, are supporting continued strong tourism activity. This is injecting income into regional economies."
The inflation outlook remained subdued and inflation was not expected to edge up into the Reserve Bank of New Zealand's (RBNZ) target band of 1 percent to 3 percent until the end of this year.
However, house price inflation was broadening and strengthening beyond the biggest city of Auckland, home to a third of New Zealand's population, into neighboring regions.
These factors suggested the RBNZ had further scope to cut the official cash rate (OCR), although the timing of the next cut was highly uncertain. Whether it would cut the OCR, currently at 2.25 percent, in its six-weekly review out next was "a very close call," but it could choose to wait until August. The RBNZ has repeatedly warned that soaring house prices in Auckland pose a risk to the country's financial stability.
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