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Monthly economic review: March 2017

10 Mar 2017

The Monthly Economic Review is an overview of the New Zealand economy. It includes the latest data on New Zealand’s economic growth, unemployment, inflation, merchandise trade and balance of payments figures, along with certain financial data (such as the Reserve Bank’s official cash rate). The unemployment rate, economic growth and central bank interest rates for several of our main OECD trading partners are also included. Each publication highlights a specific topic of interest. The Monthly Economic Review is produced eleven times per year.


While average property prices rose by 13.5 percent over the year to February 2017, QV said that “the strong increases in value evident throughout 2016 seem to have come to an end”. Tightening lending restrictions for property investors is thought to have been a factor. A number of areas reported lower average prices in February 2017 than during 2016, with other areas reporting a slowing of house price inflation. Auckland, Hamilton and Christchurch all recorded lower average prices in February. Average property prices in the Wellington region continued to rise, especially in those areas which have more affordable housing, such as the Hutt Valley and Porirua. Average prices in the Wellington region were 21.5 percent higher than a year earlier. According to QV, average property prices in the Queenstown Lakes District are on par with those in Auckland, with average prices over $1 million in each location.

The price received for New Zealand’s merchandise exports rose by 4.8 percent in the December quarter, while the price of merchandise imported fell by 0.8 percent. This resulted in New Zealand’s terms of trade rising by 5.7 percent in the quarter. During the quarter, the cost of imported machinery and electrical equipment (such as mobile phones, televisions, and computers) fell by 3.5 percent. Prices received for exported dairy products rose by 13.7 percent while meat prices increased by 1.5 percent. More recently, the ANZ Commodity Price Index rose by two percent in February, more than offsetting a 0.1 percent decrease in January. Fonterra’s latest Global Dairy Trade auction in early March recorded a 6.3 percent fall in international dairy prices on a trade weighted index basis. The price of whole milk powder fell by 12.4 percent, returning milk powder prices to their lowest level since October 2016.

Reserve Bank Governor, Graeme Wheeler, left the official cash rate at 1.75 percent in February which followed a 25 basis point reduction in November. In announcing the decision, the Governor said that “inflation is expected to return to the midpoint of the target band gradually, reflecting the strength of the domestic economy and despite negative tradables inflation”. In a speech in early March, he said that the risks around future official cash rate movements were equally weighted. February’s Monetary Policy Statement has forecast the official cash rate to commence tightening in the September 2019 quarter.

The International Monetary Fund (IMF) has forecast that New Zealand’s economic growth will remain above trend into 2018, driven by residential and infrastructure investment, moderating net migration, and an improvement in dairy prices. The Fund warned about the high levels of household debt in New Zealand.

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