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Economy probably grew 0.75pc in Q4: poll

NZN 10/03/2017 Rebecca Howard

New Zealand's economy likely continued to expand in the fourth quarter of 2016, bolstered by the ongoing surge in migration but weaker output in the primary and manufacturing sectors is tipped to weigh on growth.

The gross domestic product likely grew 0.75 per cent in the fourth quarter, according to the median of eight economists in a BusinessDesk survey, slower than the Reserve Bank's 1 per cent prediction.

The economy expanded 1.1 per cent in the third quarter. Annual growth was probably 3.2 per cent versus 3.5 per cent in the third quarter, according to the poll.

In its February monetary policy statement the central bank indicated the official cash rate is on hold at a record low 1.75 per cent until the middle of 2019.

If GDP is weaker than the bank is expecting it will only solidify its on-hold position. Currently, most economists are expecting the central bank to make a move sometime in late 2018.

According to ASB Bank, initial estimates are pointing to another "quarter of robust growth."

It is tipping 0.9 per cent quarterly growth, bringing annual growth to 3.4 per cent.

Westpac is tipping quarterly growth of 0.5 per cent and annual growth of 3.0 per cent. It expects construction to be one of the main contributors to growth and said increased demand from a rising population is expected to show through in some of the services categories. However, "the two notable drags on growth for the quarter come from primary production and manufacturing," it said.

Construction and the services sector likely drove growth although the net impact of the November Kaikoura earthquake on economic growth is the key uncertainty for the quarter, it said.

New Zealand's economy has been expanding since mid-2013, benefiting from record high migration and tourism, which has pushed up demand. That, coupled with record low interest rates, has also fuelled a housing market and construction boom.

Improving dairy prices have also meant better economic returns for farmers while other primary sectors, such as horticulture, are benefiting from strong demand.

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