NZ Economy Showing Signs of Improvement

New Zealand’s economy is expected to improve amidst the pandemic, although increased debt and hefty deficits will pose a challenge moving forward. Grant Robertson stated that the government’s swift reaction to mitigate the spread of COVID-19 was a significant factor in aiding the economic recovery, despite ongoing obstacles.

According to the Treasury, the budgets will suffer a deficit of $21.58 billion, a remarkable $10.1 billion less than had been previously anticipated. GDP growth is currently estimated at 10.5% in the September quarter, followed by 2.2% in the December quarter, while nominal GDP by June 2024 is expected to remain $67 billion below projections made in 2019. A peak of 52.6% net Core Crown debt is expected to be reached in 2022/23.

House prices will continue to rise this year by an estimated 13-16%, due to low interest rates and increased demand. The Reserve Bank is planning to put forth stricter rules for investor loans in March.

Data from the Real Estate Institute of New Zealand indicates that the national median for house prices increased from $605,000 to $725,000 in 2020, but that the price increase hasn’t turned away potential home-buyers. Currently, the highest current median property value is located in Herne Bay, where properties command close to $3 million.

Attempts to control housing price increases include the Reserve Bank’s planned loan-to-valuation ratio restrictions (LVR) on “high-risk lending”, which take effect this March. The Government may decide to support this move as a way of deterring criticism of its housing policy, and to address the increasing concern among residents who face large mortgage burdens.

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