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Economic growth is projected to edge down to 2.6% by 2020, mainly reflecting slowing private consumption as the boost from increased financial support for families passes, net immigration diminishes and housing wealth gains subside. Export growth is also set to decline once the current rebound from a dry spell is over. Inflation is projected to increase to slightly over 2% in 2019 and 2020, buoyed by higher import prices and domestic wage growth.
Monetary policy is projected to tighten gradually from late 2019. Fiscal policy is also projected to tighten somewhat, which is appropriate for the advanced stage of the business cycle. Better targeting of some recent government initiatives would support the achievement of social goals.
1. Percentage of firms expecting to increase investment in property, plant and equipment in a year's time less percentage expecting to decrease investment.
2. RBNZ projections. Net migration data are for the working-age population.
Source: ANZ Bank, Business Outlook Survey; OECD Economic Outlook 104 database; and Reserve Bank of New Zealand (2018), Monetary Policy Statement, November.
Economic Survey of New Zealand (survey page)