The economy is primed to move into "rock star" status among developed countries with potential growth of more than 3 per cent, based on latest robust consumer and business confidence surveys.
Consumers are in a buoyant mood, with rising confidence pointing to a "solid appetite to spend", according to a bank survey.
The latest ANZ-Roy Morgan survey out yesterday shows confidence rose 3 points to 122.3 in October, an index "consistent with perky spending trends".
The bank said the combined levels of business and consumer confidence pointed to firm economic expansion, with the potential to grow close to 4 per cent a year.
Meanwhile, HSBC chief economist Paul Bloxham also said yesterday the economy was at the start of a boom, and "soon to be firing on all cylinders".
The rural sector was improving with dairy prices back to high levels and growth in China would continue to favour New Zealand. The Canterbury rebuild would be almost as big as the impact of the recent Australian mining boom in relative terms, and the housing market was booming, Bloxham said.
The downside of expectations of a booming economy is interest rates will head up next year and New Zealand is likely to be the first Reserve Bank to start moving rates up, ANZ economists say. That would keep the currency high, acting as a headwind to many exporters, aside from the dairy sector which is going "gangbusters".
ANZ chief economist Cameron Bagrie said they were still circumspect about whether New Zealand could achieve such strong growth of 4 per cent, implied by the latest confidence surveys. It was doubtful the "supply side" of the economy could deliver such rates "without blowing a gasket".
"However, one thing is clear. Anything around or slightly north of 3 per cent growth would put New Zealand among the strongest performers in the OECD next year. It's been a long time since New Zealand can claim such rock star status" he said.
The drought last summer had knocked the stuffing out of the rural sector, but it has bounced back strongly with extremely good grass growth, which would help boost economic growth in the second half of the year.
But out-performing the rest of the countries in the OECD would come with a "poison chalice" because official interest would move up too, and the New Zealand dollar would remain high, Bagrie said.
The average duration of a home mortgage was now seven months, so when the Reserve Bank started to move rates it would hit people quickly, with rates likely to rise about 75 basis points over 2014. "It is going to hurt," he said.
Meanwhile, Bloxham said growth in Asia would favour New Zealand, with GDP in the key Chinese economy slowing but still running above 7 per cent for the next couple of years.
"Australia and New Zealand are very fortunate to be highly tied to the economies in the world that are growing most rapidly."
China was the main driver of the strong dairy story in New Zealand, with milk powder exports rocketing in the last three years mainly from New Zealand, following a big shift in Chinese diets and a demand for quality products. New Zealand now accounted for about 60 per cent of all of China's dairy imports.
- © Fairfax NZ News