New Zealand GDP growth expectations slashed

Global market turmoil has caused a big drop in New Zealand growth expectations, according to the latest weekly snapshot by prediction website iPredict.

Forecast growth for the September quarter has dropped from 0.9% last week to only 0.6% this week, while forecast December quarter growth has fallen from 0.8% to 0.5%.

Growth expectations for the March 2012 quarter are steady at 0.6%.

Forecast unemployment has risen slightly and is expected to be 6.4% for the September quarter (steady), 6.2% in the December quarter (up from 6.1% last week) and 6.2% in the March 2012 quarter (up from 6.1% last week).

Annual inflation is expected to be 5.0% in the September 2011 quarter (down from 5.1% last week), 2.9% in the December 2011 quarter (steady) and 2.6% in the March 2012 quarter (steady).

The market now expects Reserve Bank Governor Alan Bollard to hold off an increase in the OCR until December, when it will rise to 2.75%, and then again in March 2012 to 3.00%, and in April to 3.25%.

There is now a 68% probability that average floating-rate mortgages will reach 6.00% by the end of the year, down from a 93% probability last week, but just an 11% probability that they will reach 6.50% in 2011, down from 27% last week.

Meanwhile, New Zealand First is once again below MMP's 5.0% threshold at 4.9% (down from 5.1% last week), with party leader Winston Peters having only a 22% probability of returning to Parliament (steady).

National is forecast to get 46.0% of the party vote (up from 45.5% lastweek), Labour 30.6% (down from 31.9%), the Greens 7.0% (down from
7.3%), Act 5.5% (up from 5.0%) and New Zealand First 4.9% (down from 5.1%).

UnitedFuture is expected to get 2.0% (up from 1.8% last week), the Maori Party 1.8% (steady), the Mana Party 1.7% (up from 1.4%).

Based on this data and the forecast electorate results, National would have 58 MPs, Labour 39, the Greens nine, Act seven, the Maori Party and UnitedFuture three each, and the Mana Party two.

There would be 121 MPs, meaning National could govern with the support of the Act Party, the Maori Party, or UnitedFuture.

If New Zealand First made the 5% threshold National would have 56 MPs, Labour 37, the Greens eight, Act seven, New Zealand First six, the Maori Party three and UnitedFuture and the Mana Party two each.

There would still be 121 MPs and National would be able to govern with the support of either the Act Party or the Maori Party and UnitedFuture.