ANZ upgrades economic forecasts on house price surge

ANZ Bank chief economist Sharon Zollner. Photo / Dean Purcell

Economists at New Zealand's largest bank have upgraded their forecasts for the coming year, picking the booming housing market will boost confidence.

"We now see GDP bouncing back a little bit more strongly through the second half of this year," says ANZ chief economist Sharon Zollner in a new report.

"The unemployment rate is expected to rise a bit more slowly than previously assumed, with activity a little stronger, the wage subsidy delaying job losses, and effects of the closed border not evident just yet."

While she still expected the economy to face challenges, a buoyant housing market and a less pessimistic business outlook were likely to cushion the blow to unemployment and spending.

The REINZ House Price Index this week showed an increase of 11.1 per cent to a new high.

The ANZ Business Outlook Survey has also pointed to a steady improvement in confidence for the past two months - albeit from low levels.

ANZ now forecasts GDP growth of 10 per cent in the quarter to September 20 and growth of 2.5 per cent the December quarter.

That would take the GDP drop for the calendar year to just -2.4 per cent.

However, it sees a negative first quarter for 2021 followed by low growth through into 2022 as the impact of closed borders and the global downturn takes its toll.

It is picking unemployment will come in at 5.4 per cent for the September quarter but will rise steadily to peak at 7.4 per cent by late 2021.

The outlook was looking a bit more positive for the Reserve Bank than was included
in the August MPS forecasts, Zollner said.

"But downside risks remain. We expect that the RBNZ will drop the OCR 50bps in April next year, but risks around this outlook are looking more balanced, rather than firmly to the downside."