Tony Alexander

Economic Commentaries

Weekly Overview December 17 2015

Thursday December 17th 2015

This is the last Weekly Overview for 2015. The next one will appear on January 21. I hope everyone has a merry Christmas and a good summer break.

We learnt this morning that our economy grew by a slightly better than expected 0.9% in the September quarter and by a healthy 2.9% in the full year. This is above the average pace of growth for our economy of 2.5% but a year from now growth will probably be marginally below average.

This is because of the depressing effects of the large decline in dairy prices plus falling dairy output, related to that the uncertain negative impact of El Nino, and of course still slowing growth in China. But as mentioned repeatedly throughout this year, our economy is very well supported by non-dairy exports, booming net immigration, construction, record low interest rates, and courtesy of comments from the Finance Minister earlier this week some easing of fiscal policy in the form of extra infrastructure spending.

In the United States the Federal Reserve have raised interest rates for the first time since 2006 and indicated that a 1% rise in total is likely by the end of 2016. That implies eventually some upward pressure on NZ fixed interest rates.