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The New Zealand economy, global economy, financial markets and agricultural sector - Westpac

Analysts at Westpac noted that the election of the new Government marks the start of a new chapter for New Zealand politics, and possibly for the economy. 

Key Quotes:

"We have made significant changes to our forecasts in this Economic Overview.

Much of this Overview is devoted to our assessment of what proposed government policies will do to the economy. We have revised down our GDP forecast for 2018, but upgraded our GDP forecasts for 2019 and 2020.

That’s a bit different to the Reserve Bank’s assessment and some of the chatter around financial markets, which is that the new Government’s policies will boost GDP, inflation and the OCR. We agree, but only up to a point. The Government’s plan to increase spending will certainly boost the economy, although crowding out of private sector activity must also be considered. Meanwhile, the Government’s various plans to cool the housing market and reduce net migration will slow the economy next year.

After considering all angles, we remain comfortable forecasting no hike in the OCR until late-2019. Of course, how the RBNZ behaves will depend critically on the choice of Governor and the policy framework under which he or she operates, as discussed in the Inflation and Interest Rates section.

This Government’s commitment to a net zero carbon economy by 2050 could be one of its most significant legacies. This quarter our Special Topic explains how a beefed up Emissions Trading Scheme might work, and how it might affect sectors currently excluded from the scheme."

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