Treasury growth forecasts largely unchanged - house prices weaker

Treasury says while the conflict in the Middle East has delayed the country's recovery, it has not been derailed, with the medium-term outlook for the economy broadly unchanged from that in May's Budget.In the economic forecast released in the Pre-election Economic Fiscal update or Prefu, Treasury says annual average growth will peak at 3 percent by March 2028, down slightly from 3.2 percent in the budget update.Treasury says stronger economic momentum than first thought prior to the conflict, and a strong export sector has helped offset some of the negative impacts of rising oil prices, including weaker household consumption.When it comes to business investment, increased uncertainty and cost pressure is expected to dampen activity in the June quarter before recovering in the later part of the year 2026, in line with the forecasts in the budget.Over the forecast period unemployment is forecast to fall from 5.6 percent to 4.3 percent by 2030, in line with the Budget forecasts, while inflation is forecast to fall to just below 2 percent in 2027, slightly higher than forecast in the budget.RNZ / Samuel RillstoneHousing prices are expected to be weaker than forecast with growth of just 0.6 percent in 2027 compared with 4 percent forecast in the Budget.It puts that down to higher interest rates, growth in housing supply and lower net migration.Treasury warns there are risks to the outlook particularly the uncertainty in the Middle East and if energy prices remain elevated for longer than assumed inflation could prove more persistent for longer resulting in weaker activity.The forecasts were issued in mid-August. That means they may not have fully taken into account the recent pro-longed surge in crude oil prices and spikes in government borrowing costs globally.