GDP growth constrained by low unemployment - economist

Low unemployment could be stopping New Zealand's economy from expanding faster, an economist has claimed.

Last week Statistics NZ said GDP growth in the year to June was 2.1 percent, the lowest since 2013. Quarterly growth dropped from 0.6 to 0.5 percent.

The International Monetary Fund's latest report called that "solid" growth, despite a cooling housing market. It also compares favourably to the OECD average of 1.6 percent growth.

Economist Cameron Bagrie told The AM Show on Monday it was "lukewarm" growth, but "okay".

"A couple of years ago we were strong. We're still moving along at a reasonable clip, but 2 percent GDP growth is nothing to set the world on fire."

The cause? 

"We were speeding along the motorway, probably running a little bit too quick," he said.

"The first stage of the slowdown and moderation was just capacity constraints. We've now got an unemployment rate down below 4 percent. Finding skilled labour is hellishly hard for businesses, so we just can't grow as fast."

The IMF praised New Zealand's falling unemployment rate, saying economic growth was "close to potential" considering the circumstances. It's currently at 3.9 percent, down from 4.2 percent earlier this year.

"Downside risks to the economic outlook in New Zealand have increased, however, reflecting higher downside risks to the global economic outlook," the IMF said.

Bagrie said that was a "2020 story", with the effects yet to be felt here. 

"The global slowdown we've seen, do I think we're seeing that in the GDP figures yet? The short answer is no."

Unemployment in recent years reached its lowest point in early 2008 at 3.3 percent. 

It peaked at 6.7 percent in late 2012, in the wake of the global financial crisis. GDP growth at the time was 0.1 percent per quarter.