Westpac economists are predicting 3.5% growth next year.
The next highest forecast is 3 percent, the mean is 2.4 percent and the lowest a measly 1.3 percent, while the Reserve Bank plumped for 2.5 percent.
Factors contributing to their optimistic outlook are:
* Asset prices, particularly housing and equities, had rebounded strongly,
* the country was experiencing a mini migration boom,
* forecasts of global activity continued to be revised upward,
* a dramatic shortfall in houses being built would be a multi-year source of economic growth in a nascent recovery,
* restocking of the extremely low inventory cycle would reinforce the economic recovery, and
* leading indicators, such as business and consumer confidence, were, if anything, stronger than in most other economic recoveries.
Economic recovery will be welcome, but not all growth is good.
Max Bowden’s Business Sense newsletter* looks at the ASB/Main Report Regional Economic Scoreboard for September. It’s reasonably positive but too much of that positivity is based on rising real estate prices and retail sales rather than productivity.
Auckland and Canterbury scored 3 stars out of five. However that came from increases in house prices and retail spending, construction holding up and an improvement in new car registrations. Retail sales also helped the Bay of Plenty, Manawatu and Wanganui.
Aren’t climbing house prices, retail spending and car purchases part of what contributed to the recession?
In Northland employment picked up, the Fonterra payout helped Waikato, Hawkes Bay had increased visitor numbers and Taranaki was helped by its oil industry and dairying.
The Australian ski invasion had a positive impact on the Otago economy, That was an unexpected consequence of Kevin Rudd’s recession-busting package and those visitor numbers are unlikely to hold up now the ski season is over.
The newsletter credits the Ranfurly Shield win with boosting Southland’s consumer confidence but the increased Fonterra payout will also have had a positive impact.
The West Coast dropped a star to two as house prices went back. Wellington, Tasman and Marlborough also got two stars.
Increased growth and Westpac’s prediction for more next year are encouraging. But growth based on improved productivity, particularly in export industries, is what we need rather than growth based on increased house prices and retail sales.
*You can can subscribe to Max Bowden’s newsletter here.