Despite 2020 throwing a massive curveball at the economy in the form of the COVID-19 pandemic, New Zealand's economy is starting the new year on "strong footing", according to Infometrics.
Gareth Kiernan, Infometrics chief forecaster, says the relatively solid position of the economy is quite a surprise after a challenging year.
"We've seen a lot of strength coming through in economic indicators over the last few months," he told Newshub on Friday.
"It's been surprising, given the initial wave of job losses that we had when COVID stuck and the economy went into lockdown, how little the labour market's ended up being affected over the subsequent nine months or so."
According to figures released this week, the unemployment rate dropped to 4.9 percent in the December 2020 quarter, down from 5.3 percent in the September quarter. That was a far cry from some economists' dire predictions that jobless numbers would skyrocket in the wake of COVID-19.
Kiernan said the latest unemployment data was "pretty much the epitome" of the country's economic strength.
The fact fewer people ended up losing their jobs than predicted meant "spending has held up pretty well" and business activity, in general, has also remained strong, he said.
"So the economy is on a good footing as we head into the next year."
He said the Government's economic response to the pandemic could be credited for fending off many of the challenges brought by the virus.
"The massive amount of stimulus that's been thrown at the economy, both through fiscal policy and also monetary policy, has clearly been successful in terms of mitigating the effects of lockdown and the hit of COVID that came through initially," he said.
He said the latest data was also likely to feed through into increased optimism among businesses about their future activity levels, but acknowledged that many parts of the economy - such as the tourism sector - were still in a "lot of pain".
Kiernan said one of the key factors behind the improved growth was the "rampant housing market", which had a flow-on effect for the construction industry.
Although there was likely to be "some cooling coming through" to the market, he said there it was not expected there would be a great deal of relief in terms of housing affordability in the near future.
Infometric predicted house prices would continue rising over the next 24 months, and "strong Government action" was needed to address the crisis.
