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NZ economy may not be as slow as business confidence suggests – for now

NZ economy may not be as slow as business confidence suggests – for now

A boost in farm production during autumn could have seen strong economic growth in the June quarter, but any disappointment could tip the scales towards an interest rate cut.

Statistics New Zealand will release figures on how quickly the New Zealand economy grew in the three months to June 30.

Despite months of headlines about weak business confidence and the risks it posed to the economy, bank economists appear to believe the economy picked up speed at least marginally compared to the first three months of the year, when gross domestic product grew by a disappointing 0.5 per cent.

Westpac chief economist Dominick Stephens said that due to certain “one-off” drivers such, the economy could have grown by 0.9 per cent in the June quarter, which would see annual growth remain at 2.7 per cent.

“The economy slowed during 2017 and over 2018 has been steadily growing at a slow pace,” Stephens said. “That’s a bit different to the picture you get from business confidence surveys or even anecdotes I get from around the country. If you listen to that stuff, you’d think that the economy was slowing sharply, but it’s actually not.”

Stephens added however that the figures would be watched extra closely by the financial markets. The Reserve Bank indicated at the start of August that while it expected economic growth to pick up, there was a risk that business confidence could slow activity and if it did so it was prepared to slash interest rates to unprecedented levels.