20220512-IMF-New_Zealand_2022_Article_IV_Consultation-Press_Release_and_Staff_Report_62页_1mb

2022 Article IV Consultation Summary: New Zealand

Core Content

The IMF conducted the 2022 Article IV consultation with New Zealand, assessing its economic performance and policy outlook. The consultation concluded on May 13, 2022, with the Executive Board endorsing the staff appraisal without a meeting. The report highlights New Zealand's strong economic recovery post-pandemic, rising inflation, and challenges in the housing and external sectors.

Main Economic Indicators (2017–2027)

Main Points and Key Information

Economic Recovery and Pandemic Management

• New Zealand successfully managed the pandemic with strong public health policies and border controls, containing the first two waves and enabling a quick economic recovery.
• The economy rebounded strongly in 2021, growing by 5.6 percent, aided by significant fiscal and monetary support.
• The labor market tightened significantly, with historically low unemployment and rising wage pressures due to labor shortages and border closures.

Inflation and Housing Market

• Inflation rose significantly above the RBNZ's target range, driven by higher food and energy costs, supply chain disruptions, surging house prices, and rising wages.
• House prices surged in 2021, increasing by 24 percent year-on-year in December 2021, due to low mortgage rates, easy credit, and pent-up demand.
• Housing affordability declined sharply, with the average property valued at 7.9 times the average annual household income in 2021Q2.
• The housing market is expected to slow in 2022 as interest rates increase, credit conditions tighten, and supply improves.

Policy Recommendations

• Macroeconomic Policy: Continue policy tightening, with the pace calibrated to economic conditions. Fiscal and monetary support should be withdrawn appropriately.
• Financial Sector: Maintain macroprudential measures and increase bank capital requirements to enhance resilience against future shocks. The Deposit Take-Down Bill (DTB) is a step forward in strengthening financial regulation.
• Housing Market: Continue efforts to increase housing supply and expand social housing to address affordability concerns.
• Structural Policies: Promote innovation, digitalization, and tax reforms to support long-term growth. Focus on improving productivity and addressing structural issues.
• Climate Change: Strengthen the price-based mechanism by allowing carbon prices to rise and pricing agricultural emissions. Use proceeds from carbon pricing to support emissions reduction and compensate vulnerable groups.

Risks and Outlook

• Economic growth is expected to moderate to 2.7 percent in 2022, reflecting policy tightening, global spillovers, and ongoing Omicron wave.
• Inflation is expected to remain high and above the RBNZ's target range in 2022–23, driven by high commodity prices, supply chain disruptions, and a tight labor market.
• Downside risks dominate, including potential further outbreaks of variants, intensification of geopolitical tensions, and slower-than-expected growth in China.
• The housing market remains a risk due to high household debt, vulnerability to rising interest rates, and banks' exposure to housing.

Conclusion

The IMF's assessment indicates that New Zealand has achieved a strong economic recovery, but faces significant challenges in managing inflation, housing affordability, and external risks. Continued policy adjustments and structural reforms are necessary to ensure long-term stability and sustainable growth.