New Zealand country note: OECD Economic Outlook, May 2021

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New Zealand Economic growth is projected to pick up gradually from the second half of 2021, boosted by the progressive reopening of the border, reaching 3.5% in 2021 and 3.8% in 2022. Private consumption will remain robust, supported by the recent minimum wage increase and the wealth effect from rising house prices. Investment will expand on the back of strong house prices, record high issuance of building permits and large public infrastructure projects gaining momentum. Inflation pressure will strengthen as economic slack disappears by end-2022. The pace of vaccination needs to accelerate to reduce the risk of new outbreaks and pave the way for full border reopening in 2022. While the Wage Subsidy and other support schemes helped to preserve jobs, the government should now strengthen income support and training during job transitions to enhance reallocation of workers toward high-growth sectors. Housing supply must increase swiftly to curb excessive house price inflation and growth in household indebtedness. New Zealand is starting to reopen its border New Zealand remains almost free of COVID-19 thanks to strict border, isolation and quarantine arrangements, extensive testing, tracing and isolation procedures and pre-emptive restrictions on activities whenever cases of community transmission are found, as occurred in Auckland in February. On 19 April, the government removed quarantine requirements for Australian and New Zealand residents arriving from Australia and for other travellers who have stayed in Australia for at least 14 days, thereby reinstating quarantine-free travel between the two countries. The government is implementing a single-provider vaccination programme and has ordered enough doses to vaccinate the whole population aged 16 and over. As of 11 May, only 5% of the population had received a first dose and 2% a second dose.

New Zealand Activity already exceeds the pre-COVID-19 level

The country was almost closed to tourists and migrants until recently

Real GDP¹

Daily arrivals by non-New Zealanders

Index 2019Q4 = 100 110

7-day m.a., thousands 20 18

105

16 14

100

12 95

10

90 85 80

New Zealand

8

Australia

6

EU²

4

United States

2020

2021

2022

2 0

0 Jan-19

Jul-19

Jan-20

Jul-20

0 May-21

1. Expenditure-based. 2. EU countries that are members of the OECD. Source: OECD Economic Outlook 109 database; and Statistics New Zealand. StatLink 2 https://stat.link/oaz5x6

OECD ECONOMIC OUTLOOK, VOLUME 2021 ISSUE 1: PRELIMINARY VERSION © OECD 2021


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