NZ could 'easily slip into recession' if tourism and education slow to rebound

Tuesday, 9 August 2022

ANZ is forecasting the economy will contract over the first half of next year and could easily slip into recession if overseas tourists and international students are slow to return.

The bank’s updated economic forecasts, released on Tuesday, see the country avoiding a recession, but ANZ cautioned that assumed a strong recovery in the country’s export sector.

ANZ now believes house prices will fall further than it previously thought, predicting a 15% price drop from “peak to trough” rather a 12% decline.

It has also slashed its forecasts for net migration, forecasting that the country will not see a return to a net inflow of migrants until the middle of next year, instead of the end of this year.

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Immigration would recover to a lower level, peaking at a net annual inflow of 12,000 people, rather than 25,000, it also forecast.

“In a nutshell, non-NZ citizen arrivals are not expected to plug the NZ citizen departures gap for a while yet,” it said.

“The Australian labour market is running too hot and pays better.”

ANZ, unlike some banks, is forecasting that stronger wage growth will prompt the Reserve Bank to raise the official cash rate to 4% in November.

Many other analysts are tipping the rate to peak at 3.5%.

Economic uncertainty and higher interest rates would lead to a pullback in business investment, it forecast.