Flat New Zealand economy prompts rate cut talk

[WELLINGTON] New Zealand's economic growth remained sluggish at 0.6 per cent in the first three months of 2019, official data showed on Thursday, fuelling expectations of another interest rate cut before year's end.

The modest increase in gross domestic product for the March quarter was the same as the growth rate in the final three months of 2018, Statistics New Zealand said.

It said the quarterly figure was boosted by a 3.7 per cent rise in construction and brought the country's annual growth to 2.7 per cent for the year to March 31.

The Reserve Bank of New Zealand cut its base rate to a record low of 1.5 per cent in May, attempting to boost slowing growth.

Capital Economics said the latest figures were likely to prompt further action from the central bank.

"We think that economic activity will ultimately prove disappointing, averaging just 2.2 per cent in 2019, well below the economy's potential growth rate of around 2.8 per cent," economist Ben Udy said.

"If we're right that may prompt the RBNZ to cut rates once more to a new record low of 1.25 per cent before the end of the year."

AFP