ASB Identifies Key Risks to New Zealand's Economy in 2024

ASB, a New Zealand bank, has identified five key risks to the country's economy in 2024. The first risk is persistent inflation, although ASB expects CPI inflation to end the year below 3%, easing pressure on household budgets. However, there is a chance that inflation may not cool sufficiently, which could delay cuts to the Reserve Bank official cash rate. The second risk is fiscal policy, with ASB emphasizing the need for fiscal measures to help lower inflation while rebuilding infrastructure and maintaining critical services. ASB also highlights the importance of achieving a fiscal surplus to narrow New Zealand's current account deficit. The third risk is population growth, which is expected to slow down. However, housing shortfalls may worsen due to strong population growth and record net immigration. ASB predicts a 7-10% rise in house prices this year. The fourth risk is global tensions, with potential volatility triggered by turmoil in Gaza and Ukraine. The fifth risk is the Chinese economy's struggle to regain pre-Covid-19 momentum and the outcome of the United States presidential elections in November, which could have significant impacts on the global economy. ASB warns that a more protectionist global backdrop could create headaches for New Zealand. On the positive side, a weaker US dollar under a possible Trump administration could strengthen the Kiwi dollar and help lower New Zealand inflation. [70509c5e]