ASB: Get over the gloom, the economy's fine

US-China tensions aside, the global economy was continuing to perform well, ASB said. Photo / File

New Zealand's outlook for economic growth remains healthy and business should get over the post-election blues, according to ASB's latest Quarterly Economic Forecast.

"It's understandable the change of government has created uncertainty while key policies are fleshed out," said ASB chief economist Nick Tuffley.

"But despite the genuine concern felt by many, we would like to see more recovery in sentiment soon because New Zealand continues to enjoy some decent economic conditions."

"Positive thinking is key because New Zealand's economic growth is actually expected to gradually accelerate to 3.4 per cent by the end of 2019."

A slump in business confidence and a rise in international trade tensions has been blamed for dampening growth expectations over the past year.

A year ago ASB was forecasting GDP growth above three per cent for 2018.

In its latest forecast, released today, it is picking GDP growth has dipped to 2.8 per cent in the first quarter and that it will track at 2.6 per cent for the rest of the year.

"But NZ continues to enjoy some good tailwinds," Tuffley said.

The terms of trade had set a fresh high, interest rates were set to remain low into next year, net migration inflows, although slowing, would still deliver above-average population growth and accelerating wages would support consumer spending growth, he said.

On the downside, the construction sector was suffering from capacity constraints and would struggle to grow in the short term.

Tuffley said uncertainty about Government policy seemed to be the main cause of business caution.

Providing as much "assurance and rationale as possible around government policies, which will help mitigate the risk of weak business confidence constraining economic growth," he said.

Trade tensions were also of some concern, given the New Zealand economy's reliance on exports and had "put the world on edge", he said.

But as it stands the volume of trade affected by new tariffs was very small.

Meanwhile, US-China tensions aside, the global economy was continuing to perform well.

"The Eurozone surged into the end of 2017 with annual GDP growth hitting 2.5 per cent, the fastest growth rate since 2007, Tuffley said.

"Plus, the Australian economy continues to perform well thanks to higher commodity prices and firm non-mining investment intentions sending positive signals for future economic performance. New Zealand is set to benefit well from this continuing strong global demand."

ASB forecasts unemployment to fall to 4.1 per cent by this time next year, 4.4 per cent.

It expects consumer price index inflation to remain subdued this year but private wage growth to pick up slowly to 2.1 per cent by early next year and 2.7 per cent by 2020.

House price growth is forecast to continue to moderate - falling below one per cent per cent by 2020.