The current phase of solid economic growth is tipped by Westpac Bank economists to last till 2018. Photo / Robert Trathen
New Zealand has entered a new debt-fuelled phase of economic growth, say Westpac Bank economists, with home owners borrowing against their properties to spend up.
"Households have thrown caution to the wind, and a 'borrow and spend' dynamic has emerged among rising house prices," said chief economist Dominick Stephens in
the bank's latest Quarterly Economic Review.
He expected the current phase to continue for "another year or two" - which should mean reasonable economic growth - though not as strong as that last seen in 2014.
"But debt-fuelled growth is not sustainable. For that matter, neither is the Canterbury rebuild or rapid population growth, both of which we expect to taper off. "
New Zealand's economy is then likely to enter a phase of slower GDP growth, beginning around 2018, said Stephens. "At that time, we would expect to see interest rates and the exchange rate falling, while house prices stagnate or fall".
