In spite of the entire world facing the repercussions from the pandemic, with virtual implementations of restrictions on the movement and economic activity, New Zealand in the mid-January enjoyed a concert held by the local band Six60 where is more than 20,000 people seemed to have attended. It was held in Waitangi locality of the North Island. New Year’s festivals around the country also attracted similar sized crowds which showed how successful the country was in containing the outbreak which in turn led the economy to enjoy an upbeat in 2021. The success was attributed to the ‘Hard and Early’ response to the pandemic which helped mitigate many ill effects of the virus. NZ remains to have one of the best economies in the world, winning awards as world’s first sovereign upgrade since the beginning of the pandemic by the agency S&P Global Ratings stating that, New Zealand’s monetary flexibility, wealthy economy and institutions are conducive to swift and decisive policy actions and offset the country’s external imbalance. That said, with every chance that the pandemic may blaze up again, it also cautioned that growth could continue to be reserved, although the vaccination program that has already began in earnest will alleviate much of this threat. As such, FocusEconomics has projected the New Zealand economy to raise by 4.5 per cent this year and 2.9 per cent in 2022. NZ’s economy shrunk by a record 2.9 percent last year, with a 1-percent contraction and
However, concerns raised towards NewZealand’s rising house prices. Conferring to the CoreLogic Home Price Index (HPI) for February, nationwide assets values increased by 2.6 percent over the month and an enormous 14.5 per cent over a 12-month period, a rate that has not been seen since the 12 months to October 2016 (14.8 per cent).
From March1st onwards, New Zealand’s cool market initiative will require the Reserve Bank of NewZealand (RBNZ) to rally for house prices while rate settings are made as it will add a significant caution to bank’s approach towards the monetary policy. Roberston confirmed that there was an impact on housing when making monetary and financial policy decisions, and that the bank’s objectives and mandates remain the same – Maintain price stability, support full employment and promote a sound and stable financial system.
CoreLogic’s head of research, Nick Goodall shared his expectations saying, that with the hard line taken by the Government to decrease speculator activity, and now the Reserve Bank having a bit of a mandate to support them, the outlook for future property speculation looks less convinced, although with the Prime Minister also stating a desire to protect the wealth in their major asset class, expectations are for a decelerating of growth rather than a reverse as the regulators recently stepped up to implement loan to value restrictions with debt to income measures expected in May, the house price inflation will begin to grow rather slowly.
RNBZ might have just too many targets to meet whilst considering the house prices. Nick Tuffley, chief economist at ASB Bank in Auckland, told Bloomberg that more the objectives they have got, the more complicated it can be to meet all those objectives and that inflation and employment is what they will focus on, but they have to think harder about how their decisions will impact on the housing market as well.
After the unexpected contraction in the fourth quarter depends solely on how the economy performs in the first quarter of the year 2021. The lack of international tourism might keep the GDP growth in the negatives and if that is the case, will the New Zealand jumps to its recessionary territory again is the big question. With their government making all the required changes to fight this impact by promoting tourism within its boundaries through the innovative initiatives and campaigns like #DoSomethingNewNZ and providing reports to its citizens attitudes towards domestic tourism but New Zealand might have to wait a little longer than first anticipated, may be a quarter to two longer to celebrate its rebirth of the economy.