Economic forecasts revised downward
All this means the Reserve Bank will not be raising interest rates until mid-2013, NZIER says.
Global economic disruptions look like knocking New Zealand’s recovery off balance, says the latest update from the New Zealand Institute of Economic Research
The institute’s latest set of quarterly predictions, released this morning, highlights the likely wider economic fallout from the Eurozone crisis.
A combination of hits on exports and tourism, plus low confidence keeping domestic spending low will curb any upturn in New Zealand’s economy.
The institute is not talking about another recession, just a longer period of sub-par growth.
It also describes the government’s goal of a return to surplus by 2014/15 as “challenging” and principal economist Shamubeel Eaqub said it could be delayed.
“New Zealand’s fledgling recovery will be severely hampered by the rapidly worsening global economy”, he said.
“The fall-out from the European sovereign debt mess will depress export growth. It will weigh on exports and tourism, which had been a buffer. Investment will remain depressed because banks will find it harder to raise capital overseas. The uncertainty around the global outlook is also weighing heavy on business and consumer confidence and thus spending.”
The institute’s “central scenario” is for GDP rising just 1.5% next year, with a gradual rise to 2.5% by 2014.
“There is little domestic demand growth. Households are saving, the housing market is struggling, businesses are cautious about investing and the government is in a period of fiscal consolidation. The Canterbury rebuild will provide a much-needed injection of building activity from mid-2012, but the speed of the recovery programme is not yet clear.”
All this means the Reserve Bank will not be raising interest rates until mid-2013, he said.
“Inflation will be contained as excess labour market capacity keeps a lid on wage growth and firms hold prices low to remain competitive. If the global situation worsens, the RBNZ will have to cut the OCR.”
Rob Hosking
Thu, 01 Dec 2011
Thu, 01 Dec 2011
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Economic forecasts revised downward
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