Westpac forecasts that New Zealand’s economy will contract deeper into recession when the official Q3 national accounts are released on 20 June.
Westpac expects a 0.2% fall in aggregate real GDP for the March 2024 quarter, which would represent the fifth decline in the last six quarters.
That would mean that New Zealand’s GDP will have fallen by 0.2% year-on-year.
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If Westpac’s forecast comes to fruition, is would represent a heavy decline in per capita GDP, given New Zealand’s population has experienced the strongest increase in modern history.
“As a result, GDP per person has fallen by 4% from its 2022 peak and is set to fall further over this year”, says Westpac.
Westpac’s GDP forecast is weaker than the Reserve Bank’s, whose May Monetary Policy Statement forecast a 0.2% rise in GDP in the March quarter.
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Westpac’s forecast would see the economy fall below its non-inflationary potential (see next chart) and “would favour an earlier start to OCR cuts”.
Separate data released on Thursday, published by Justin Fabo at Antipodean Macro, shows that New Zealand’s economy continues to weaken.
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Nominal consumer spending in New Zealand remained weak in May and would have fallen heavily in real per capita terms:
The quarterly growth rate in domestic payment card transactions is negative:
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Clearly, monetary conditions in New Zealand are far too tight:
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Accordingly, the Reserve Bank needs to follow Canada and cut the official cash rate to stem the bleeding.