HSBC Forecasts New Zealand Will Be the Rock Star of 2014 With 3.4% Growth

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By Vittorio Hernandez | January 8, 2014 10:06 AM EST

For decades, New Zealand had stood under the long shadow of Australia, the economic power of Oceania. However, economists said it is Wellington's turn to shine in 2014 and upstage not only Canberra but other developed markets in terms of economic expansion.

Vittorio Hernandez
New Zealand's Parliament Building

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Paul Bloxham, chief economist for Australia and New Zealand of HSBC, described Oceania's David as the "rock star" economy of this year. He forecast that New Zealand, with a projected gross domestic product growth rate of 3.4 per cent, would outpace Australia and other developed markets, CNBC reports.

The positive outlook was New Zealand finance minister's message two weeks ago in this video.

YouTube/NZNats

While the rest of the developed world are expected to grow at an average rate of 2.5 per cent, New Zealand would enjoy pretty solid growth for 2014, Mr Bloxham said.

For 2013, New Zealand is expected to have a record 3 per cent growth rate, bolstered by its construction spending for the Canterbury rebuild, a housing boom fuelled by low interest rates and net immigration, and rising dairy prices spurred by strong demand from China, notwithstanding 2013's botulism scare.

Along with the rock star tag, for 2014, New Zealand's money, the kiwi dollar, will be known as the hottest currency of 2014, said Kathy Lien, managing director of BK Asset Management.

"Of all the major currencies our favorite is the New Zealand dollar because in addition to talking about raising interest rates this year, the Reserve Bank also laid out a plan to bring rates from the record low of 2.5 percent to 4.75 percent by the first quarter of 2016," CNBC quoted Ms Lien's note last week.

Mr Bloxham's optimistic outlook was shared by BNZ chief economist Tony Alexander in his talk to Kiwi expats in London in late 2012 as seen in this video.

YouTube/KeaNewZealandTV

But Daniel Martine, economist of Capital Economics Asia, warned that several factors could hinder New Zealand's forecast growth. These are the slowdown in its major export markets, Australia and China, and the plan by the Labour-led government of John Key to return to a budget surplus by 2014-15, making strong government consumption growth initiated in Q3 2013 unsustainable in 2014.

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(Photo: Vittorio Hernandez / )
New Zealand's Parliament Building
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