Statistics New Zealand released the GDP figures for the three months ended September yesterday.
The reported growth was 0.6% in the quarter, in line with market expectations.
Annual growth was reported at 2.7%, ahead of the 2.4% expected by the market and above the 2.6% forecast by the Reserve Bank.
The interesting parts were historical revisions provided by Statistics NZ. The annual benchmarking of the GDP figures has resulted in significant upward revisions to growth over the past few years. GDP growth is now reported to have peaked at 4% in the 2016 calendar year.
These upward revisions to GDP will have implications for monetary policy. ASB senior economist Jane Turner said the weakness in previously published per-capita growth estimates was always surprising, particularly given the strength of economic supports including low interest rates, strong labour market and a robust export performance, particularly from tourism and fruit.
"The key question is what will be the implications for future growth and inflation, although that may take some further analysis. Nonetheless, the stronger economic momentum should boost the Reserve Bank’s confidence of inflation picking up."
The Reserve Bank might bring forward the timing of its forecast official cash rate increase at the February Monetary Policy Statement, she said.
The central bank did not expect rate rises until late 2019. ASB was forecasting a rise in interest rates in early 2019.
Former finance minister and National Party finance spokesman Steven Joyce was gloating when the revised figures were released.
The revised figures for the 2014, 2015 and 2016 calendar years were 3.6%, 3.5% and 4% respectively.
"That’s a highly respectable growth story in anyone’s language. GDP per capita has also been revised upwards in those three years. We’ve had 8.3% in real GDP per capita growth over the last five years."
The figures should finally put to bed the fallacy New Zealand was having a productivity recession, he said.
The figures showed the construction industry remained strong and had the largest quarterly growth since March 2016. Road and rail infrastructure was a key driver and provided the largest increase in 10 years.
New Zealand had now experienced 18 quarters of consecutive economic growth and had grown in 26 out of the last 27 quarters, Mr Joyce said.
"These figures provide clear confirmation the new Government has inherited a very strong economy driven by the strong economic plan of the previous government."
ANZ senior economist Phil Borkin said there were plenty of questions on the outlook for inflation. He expected the Reserve Bank would be cautious interpreting the figures.
"We suspect a good chunk of the upward revisions will feed straight into its estimates of the economy’s potential growth rate rather than its estimate of the output gap."
Latest data showed the economy cooled in the past year. Annual growth fell from more than 4% in mid-2016 to less than 3% now, he said. That was likely to persist for a few quarters.The economy was navigating a softer housing market and growth drivers were moving.
"Throw in some unease regarding the new political direction and, more recently, dry weather potentially hampering agricultural production, and we see a reasonable chance of a growth wobble."
At a glance
• Economic growth revisions show a booming economy.
• Size of the economy now $278billion.
• Still no inflation pressures.
• No interest rate rises in the near future.
