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Warm, flat beer rather than champagne for the economy

Keep the champagne - or the Chardon - on ice for a bit. The latest New Zealand Institute of Economic Research survey of economic forecasts show a deteriorating medium term outlook.

The average outlook for the current financial year has taken a dive since the last survey three months ago – down from minus 0.6% GDP growth to minus 1.6% for the year to March 2010.

There is a barely significant improvement in expectations for longer term: GDP is now expected to grow 2.8% in the year to March 2011, up from 2.7% three months ago.

And – no surprise here – economists are a lot less sure than they were that the exchange rate is going to settle down and stop behaving like it has ants in its pants.

The average consensus forecast is for a 6% decline in the 2009/10 year, but the range is wide at -16% to +4%.

The job outlook – with employment being even more of a lagging indicator in this recession than normally – is bleak - consensus forecasts suggest around 60,000 job losses over the next year and subdued wage inflation over the next two years.

Allied to that is a slump in the outlook for private consumption – a decrease of 0.7% is anticipated over the next year, compared to an expected minor increase of 0.1% three months ago.

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