New Zealand's booming economy is at risk of a hard landing once temporary factors ramping up growth wear off, economists say.
Our economy is the envy of the world with an annual GDP growth rate of 3.3 per cent and unemployment of 5.6 per cent, both near the top in the OECD.
But the current rate of growth is unsustainable, a panel of some of New Zealand's top economists told a briefing in Auckland today.
And they said many New Zealanders are not aware how much our economy is relying on one-off boosts like the Christchurch rebuild, or how quickly it could slow down when they come to an end.
Westpac chief economist Dominick Stephens said New Zealand's recent growth had been fuelled by the Canterbury earthquake rebuild, low interest rates and a surge in net migration, which hit a 10-year high in the year to June.
''When the Canterbury rebuild ends people will be quite surprised by the size of the downturn,'' he said.
Stephens said the strong net migration, which has been largely due to fewer New Zealanders moving to Australia and greater numbers returning from across the Tasman, is unlikely to continue at current levels for long.
''Australia will one day make a comeback. We are forecasting zero net migration for 2018. And one day interest rates will get big enough to crush the housing market,'' he said.
''My fear is all three of those things will happen at the same time.''
ANZ senior economist Sharon Zollner said a soft landing for the New Zealand economy was unlikely to happen.
''People say the New Zealand economy has three gears: first, fifth and reverse. For us to engineer a soft landing and have that Goldilocks profile for a while is unusual,'' she said.
''The New Zealand economy has had an excellent run and growth is moderating but that's not a bad thing. We're not an 'Asian Tiger' and we can't sustain 4 per cent growth. We should be happy with 3 per cent or even 2.5 per cent.''
Zollner said New Zealand is at risk from a possible slow-down in China, where officials are loosening housing policies to stop a fall in property prices.
''The tightrope policy makers are trying to walk is a wet noodle,'' she said.
The panellists covered a range of topics affecting the economy such as the Reserve Bank's loan-to-value restrictions, the high New Zealand dollar, as well as the election on September 20.
BNZ senior economist Craig Ebert said he had noticed more enquiries from overseas about the election in the past few weeks.
''What was regarded as a fait accompli has become a bit more uncertain. If the Government does change it will bring quite a different agenda, not just Labour but the parties to the left of it.''
He said National's new policy to boost subsidies for first-home buyers would only have a marginal effect on the housing market.
ASB chief economist Nick Tuffley said the LVR restrictions have not had the impact the Reserve Bank forecast, although they have reduced sales turnover.''There's been a degree of effect but I'm not as high-fiving as the Reserve Bank over the impact of them.''
As for the high dollar, ANZ's Zollner said it made sense given the strength of New Zealand's economy compared to other countries, but there was a chance the kiwi could fall dramatically.
''We'll look back at these days fondly. The cause of the exchange rate fall may be worse than the exchange rate.''