Out of the doldrums, but not out of the woods
The New Zealand Institute of Economic Research (NZIER) latest Quarterly Prediction says the New Zealand economy is on the cusp of a fragile recovery.
NZIER’s Principal Economist Shamubeel Eaqub said the early part of the recovery looks to be strong, as confidence returned. However, the foundations of the recovery are weak.
The NZIER September 2009 Quarterly Predictions provide commentary on the New Zealand economy and forecasts covering the next five years.
“We expect the economy to start growing again from the December quarter. Consumer and business confidence is improving and some release of pent up demand is likely. This will see economic growth of 3.0% in the year to March 2011, after a 1.8 per cent contraction in the March 2010 year. But times will remain tough for households with the unemployment rate set to climb to around 8 per cent in late 2010,” Mr Eaqub said.
“The New Zealand economy is on the cusp of a fragile recovery. The early part of the recovery looks to be strong, as confidence returns, pent up demand is crystallised and firms restock depleted inventories. Significant monetary and fiscal stimulus combined with migration-led population growth means the economy is set to bounce from very weak levels.”
“However, the foundations of the recovery are weak. The speed and sustainability of the upturn remain uncertain. Major imbalances relating to house prices and household debt persist. The labour market looks set to deteriorate further. Rising interest and a stubbornly high exchange rate could derail the nascent domestic recovery and a much needed rebalancing towards exports.”
“A sustainable course would be a shallow recovery path accompanied by rising savings, reduced borrowing and strengthening exports. The less desirable alternative may be surging short term growth followed by another recession.”
NZIER is an independent economic consulting and forecasting organisation
