Kiwi Economy Shows Resilience Amid US-Iran Conflict Fallout

New Zealand's economy is expected to have dodged significant damage from the US-Iran conflict, despite initial fears of widespread disruption and reduced growth. According to Statistics NZ data, quarterly growth for the three months ended June will likely come in at 0.1-0.2 percent, taking the annual rate to 2.2 percent.

BNZ senior economist Doug Steel noted that there has been a stronger than expected economic pulse, with the primary sector, goods producing, construction, and wholesale trade sectors driving growth. However, consumer spending is expected to decline due to weaker household spending.

ASB economist Wesley Tanuvasa warned of uneven and top-heavy growth, with strength concentrated in primary and goods-production sectors, while services are expected to be meaningfully weaker. The Reserve Bank (RBNZ) forecast no growth for the June quarter, but recent data may assuage some committee members' concerns about downside risks to growth.

Westpac senior economist Michael Gordon said that a stronger lift in growth may not shift the RBNZ's strategy or gradual cash rate rises. However, market bets are tilted towards a rise next month due to the recent upsurge in the US-Iran conflict and spike in prices.