The economy is expected to regain some momentum this year, largely underpinned by Government spending and strength in the rural sector.

In Westpac's monthly economic overview, the bank's chief economist Dominick Stephens said while there was a clear economic slowdown in late-2018, and deeper than expected, he predicted momentum would be regained this year.

"Petrol prices have unwound most of their previous spike, which will allow bruised household wallets to heal,'' Stephens said in a statement.

Alongside the easing fuel prices, Stephens said the other key drivers of 2019 growth would be Government spending and a successful farm sector.


"Right now the New Zealand economy is in an extraordinarily ordinary position,'' Stephens said.

ASB chief economist Nick Tuffley also predicts an increase of economic momentum in 2019, with the export sector still performing well and agricultural markets moving positively.

"That said, the Chinese economy, or more specifically Chinese consumer demand, remains key to our export performance,'' Tuffley said.

Listen to The Country's Jamie Mackay interview ASB Rural Economist Nathan Penny below:

While there had been eight consecutive years of expansion, Tuffley said the momentum had slowed since 2017, with capacity constraints in construction, a key economic driver, but also in international tourism, which appeared to be slowing.

Tuffley also noted the risks of global growth weakening further were rising, and political influences on economic activity were "making the outlook messy'' he said, of unconcluded United States-China trade tariff talks and pending Brexit "D-Day'' in the United Kingdom, on March 29.

"Increasingly, Brexit looks like the deck of the Titanic but without the harmony of a brass band and less capability of arranging deck chairs,'' he said.

Stephens said unemployment, inflation and the exchange rate were all close to average or neutral levels, the economy running neither above nor below its capacity "speed limit'.

"Such a balanced situation is something normally seen in economics textbooks, not real life,'' Stephens said.

However, Stephens retained Westpac's long-held view the economy would slow again in the early-2020s.

"One major reason is that we are about to hit peak construction,'' he said.

Population growth was slowing more sharply than previously understood and earthquake reconstruction was also winding down.

"After the 2019 peak, residential construction activity is going to slowly decline,'' he said.

That would be a big change from the 2010s when homebuilding activity more than doubled, he said.

While the global economy was slowing, Stephens said the slowdown to date had been very consistent with earlier forecasts, and not as negative as the financial markets believed.

"We expect global growth will keep ticking over, just not as vigorously as the 2017 peak,'' he said.

Crucially, Stephens said he still expected the US Federal Reserve would lift its interest rates this year, while the financial markets had "gone off the idea''.