The Treasury

Global Navigation

Personal tools


Monthly Economic Indicators

Executive Summary

  • March quarter employment and retail trade data reveal strong domestic demand at the start of 2015. 
  • The resurgent Auckland housing market prompts housing policy initiatives from the RBNZ and the Government.
  • Inflation expectations appear to have stabilised at a relatively low level, while other inflation indicators suggest inflation will remain low in the near term.

Key economic data releases over the past month have confirmed that, for the most part, the domestic economy started 2015 on a solid footing.  Jobs growth remained strong in the March quarter, buoyed by above-average levels of business confidence and firms’ own-activity expectations.  Labour supply growth was equally strong as New Zealand’s robust relative economic performance has strengthened net migration inflows while also enticing more people into the labour force.  The decline in the unemployment rate has slowed as a result, while nominal wage growth has been more modest than anticipated. 

Consumers maintained a healthy appetite to spend in the first quarter of this year, with growth in retail sales surging and setting the platform for a solid March quarter GDP outturn (due to be released on 18 June). 

Adding to the strong domestic demand story is the renewed vigour in the housing market, particularly in Auckland.   New policy initiatives announced by the Reserve Bank (RBNZ) and the Government this month are expected to gradually damp down the demand for housing, although the impact is estimated to be modest.

In the meantime, inflation indicators remain benign, fuelling speculation in financial markets that the RBNZ will cut the Official Cash Rate (OCR) in the near future.   The Reserve Bank will review the OCR with the release of its Monetary Policy Statement on 11 June.

The main headwinds to the New Zealand economic outlook continue to stem from the external sector.  The 51% fall in dairy prices since early 2014 will hit dairy incomes hard this season and next.  Some offsets continue to come from better world prices for other commodities, including meat and seafood, and the recent fall in the New Zealand dollar.  However, on balance, export values are expected to decline further over the coming year.

International long-term interest rates rose over the month, owing to firmer expectations of a tightening in US monetary policy settings, an improved growth outlook for the euro area, risks around Greece and reduced likelihood of extended monetary stimulus in Japan. Meanwhile, the central bank of China cut its benchmark interest rates in response to historically slow growth, and across the Tasman the Reserve Bank of Australia eased policy further to boost domestic demand. Subdued growth across New Zealand’s major trading partners overall contrasts with the solid momentum in the domestic economy, and continues to present headwinds to growth.

Overall, these recent developments are consistent with the economic forecasts in the Budget Economic and Fiscal Update (BEFU) which were finalised on 10 April 2015 and released on 21 May 2015.

This month’s special topic is a comparison of the recently released New Zealand and Australian Budgets.

Page top