The NZIER's latest compilation of Consensus Forecasts shows that economists have in the past three months substantially marked down their expectations of the performance of the economy in future - and particularly in three years' time.
NZIER principal economist Christina Leung said although the economy appears resilient despite the sharp rise in interest rates over the past year, expectations that interest rates will now have to go up by more than previously expected "are likely to have driven a downward revision for the later part of the projection".
The projections from the economists, which are for March years, go as far as March 2026. The forecasts have been contributed by economists from the country's five biggest banks as well as the Reserve Bank, The Treasury and NZIER itself.
Leung said as more fixed-term mortgages get repriced within the next twelve months, "the dampening effect of interest rate increases on economic activity will become more apparent over the coming years".
Compared with the consensus forecasts that were produced in September, the latest set of forecasts predict lower GDP, consumption, investment, imports and exports in three years time - but higher unemployment, (though higher wages too), higher inflation, and higher interest rates.
GDP growth for the year to March 2026 is now forecast to be just 1.6%, compared with a forecast in September that it would be 2.2%. In November, of course, the RBNZ produced new forecasts that projected four negative quarters of GDP growth starting from the middle of next year.
In terms of CPI inflation, the economists are now picking this to be 2.2% by March 2026 - that's just slightly higher than they picked in September (2.1%) - but it would still put inflation above the RBNZ's explicitly targeted figure (which is 2%) in over three years time. Annual inflation as of September 2022 was running at 7.2%.
As of September 2022 unemployment was just 3.3%. Economists now see this rising to be 5.1% by March 2026 (their previous forecast made in September was for 4.8% unemployment by March 2026).
NZIER's Leung notes that household consumption forecasts have been revised down beyond 2024.
"The decline in sales of durable goods and an increase in the household saving ratio over the past year already indicate signs of reduced appetite for spending on big-ticket items due to increased living costs and interest rates.
"Forecasts for residential investment have been revised further down. This reflects expectations of weaker housing market activity and construction demand for the coming years," she says.
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