Housing downturn will weigh on activity before long

The 1.7% q/q rise in New Zealand’s production GDP and the 0.9% q/q rise in Australia’s GDP in Q2 were among the strongest increases among major advanced economies. (See Chart 1.) However, GDP growth will slow sharply over coming quarters. Recent output gains have been driven by a reopening bounce as services spending jumped, which will soon have run its course. While the high household savings rate will allow further strong gains in consumption in Australia, the savings rate is around 0% in New Zealand. Meanwhile, the housing downturn will continue to weigh on dwellings investment in Australia and homebuilding will start to fall in New Zealand before long, too. Our forecast that GDP growth will slow to around 1.5% in both countries next year is well below the analyst consensus.