NZIER’s principal economist Christina Leung said strong migration and tourism were boosting demand in construction, while Fonterra’s upward milk price revision to next year’s forecast payout meant profitability was continuing to improve for the rural sector.
"Construction demand remains very strong, despite a dip in activity in the first quarter of 2017.
"Strong migration and tourist inflows continue to support demand for housing, hotels and office space," Ms Leung said.
She said while GDP [gross domestic product] growth and inflation were soft at the start of the year, recent indicators pointed to a pick-up in activity from the second half of 2017, pointing to a solid outlook for the economy.
Ms Leung, like most economists, is picking the Reserve Bank will leave the interest-driving official cash rate (OCR) on hold at 1.75% until late next year. A small number have pushed that into 2019.‘‘Low inflation adds to the case there’s no urgency for the Reserve Bank to lift the OCR.
Recent developments afforded the Reserve Bank time to assess the situation before starting its OCR tightening cycle, she said.
Inflation had been subdued and lower than what the robust growth rate and extent of capacity pressures in New Zealand’s economy would suggest, Ms Leung said.
