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Economy performing better-than-expected: ASB

The New Zealand economy is faring better than expected despite the second lockdown in Auckland, according to ASB economists.

Monday, September 7th 2020, 3:14PM

The big four bank has revised its growth and unemployment predictions in its latest quarterly outlook, and believes NZ will avoid a worst-case scenario. 

ASB is encouraged by the "remarkable resilience of the NZ economy" since the pandemic hit.

"Back in May, we were bracing ourselves for a recession double the size of that seen in the 2008/09 global financial crisis, and still found ourselves at the more optimistic range of economic forecasters.

"Subsequently, we have found ourselves nudging our GDP forecasts higher – we now expect the economy to shrink around 5% when comparing the end of 2020 with the end of 2019, vs a 6% decline we had previously forecast. Furthermore, we see some risk of further upward revisions over coming weeks."

The bank expects the housing market to fall by just 3%, down from an earlier forecast of 6%.

The lender's economists, including Jane Turner, pictured, say recent data, including construction activity, held up better than expected, indicating economic activity was not hammered by social distancing and higher Covid alert levels. 

While the economic outlook is not as bad as first feared, the Reserve Bank is still expected to take bold action on interest rates.

ASB analysts, along with economists at the other big four lenders, expect the Reserve Bank to slash the official cash rate to zero and introduce a direct lending facility with the banks to push down rates. 

Reserve Bank governor Adrian Orr has expressed a desire to lower interest rates to help households through the crisis. 

While most economists predict the OCR will go below zero, Kiwibank's Jarrod Kerr remains unconvinced the move would help. 

Kerr and team believe the economic damage does not warrant a drastic central bank rate cut. 

"The economy is simply not in a bad enough place to justify the risky experiment that is negative rates. The distortions thrown up by negative rates more than offset the stimulatory benefit."

Nonetheless, Kerr and co predict a cut is on the way, with February "just as likely, if not more likely, than April".

Tags: ASB housing market Kiwibank OCR forecasts RBNZ Reserve Bank

« Kiwibank just over a month away from entering adviser marketANZ redeploys staff to broker applications »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 28 March 2024 9:42am

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