0. NEW ZEALAND ECONOMIC AND BANKING UPDATE Independent Schools of New Zealand 23rd March 2017

1. Good economic signals from our leading indicators
GDP vs Confidence Composite –
firms are still optimistic
Financial conditions are still flagging reasonable momentum despite the high NZD
Job ads are up strongly across the majority of New Zealand
A high job vacancy rate flags continued falls in the unemployment rate
Source: ANZ, Statistics NZ, RBNZ, Bloomberg

2. Housing is slowing and the outlook for dairying is better, but some other constraints are apparent
Housing sector activity is responding to LVR restrictions and less credit availability
Biggest problem facing businesses: skill shortages more to the fore
Dairy prices have recovered strongly
A mismatch between borrowing and deposit growth still needs to be reined in
Source: ANZ, REINZ, Statistics NZ, RBNZ, GlobalDairyTrade

3. We continue to “like” medium term signals for New Zealand
The terms of trade “correction” has been milder than initially feared and export commodity prices are now lifting
Divergences between New Zealand and Australian participation rates tells a “policy” story
No shortage of people wanting to come to New Zealand
Inflation is in check; projected to rise slowly which means a more demure cycle for the OCR
Source: ANZ, Statistics NZ, ABS, RBNZ

4. Forecast table Variable Forecast Comment Risk/Heat Map GDP
3.2% y/y for 2017 Q3
The economy is recording decent momentum, and we expect that to generally continue at least over the first part of Downside risk mainly stems from offshore.
Unemployment rate
4.7% for Q3
We are looking through the Q4 lift in the unemployment rate. Job ads firmly signal it lower. Finding staff is a huge challenge for firms.
OCR
1.75% by Sep 2017
With strong growth, capacity pressures emerging and inflation past its lows, further OCR cuts would now be hard to justify. Next move is up.
CPI
1.9% y/y for 2017 Q3
Headline inflation is past its lows, with base effects seeing it return to the target mid-point early next year. Domestic and core inflation should also gradually lift.
Neutral
Negative
Positive
Neutral
Negative
Positive
Neutral
Down Up
Neutral
Negative
Positive
*The End*

5. Long Term Trends Growth and transformation of Asia
Shift from Trade in Goods & Commodities to Data & Services
Rise in power and influence of SME and the self-employed
Ever increasing rise in consumer power and expectations

6. The changing face of Banking
Regulators are asking banks to hold more capital
The cost of domestic funding (customer deposits) is increasing; wholesale funding costs have stabilised but remain high
Technology intensity of the industry has increased

7. How we can help Supporting your Students Supporting your Staff
Presentations from Economics, Careers advice from Senior Executives.
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