NZ Treasury - Flatter house prices a drag on consumption growth

Omkar Godbole FXStreet Contributor

The New Zealand Treasury monthly economic analysis for November shows the flatter house prices are likely to act as a drag/or provide less impetus to consumption growth than in recent years.

Key points

Employment growth and increases in wage and transfer incomes, combined with still high (albeit falling) net migration, should lead to continued consumption growth at a reasonable rate over the next year.

Growth in the global economy has continued to gather pace.

Dairy prices fell further in October and there is some risk to production for the rest of the season with the dry weather creating low soil moisture levels.

Gradually unwinding LVR restrictions is unlikely to have a major impact on house price inflation.

Despite weaker prices and October consents, there is still strong underlying demand for housing.

Depreciation of the exchange rate over the past month may start to put upward pressure on prices of these types of capital goods.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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