A technical recession -- where real gross domestic product (GDP) contracts in at least two consecutive quarters -- was avoided in 2010, Treasury said in its monthly economic indicators report for January published today.
A technical recession -- where real gross domestic product (GDP) contracts in at least two consecutive quarters -- was avoided in 2010, Treasury said in its monthly economic indicators report for January published today.
It said the economy was weaker than expected in mid-2010, even allowing for extraordinary events, and the outlook for 2011 is more positive, largely driven by the Rugby World Cup, earthquake reconstruction and high commodity prices.
GDP contracted by 0.2 percent in the September quarter.
"We expect that recession was avoided in 2010 with positive growth in real GDP during the December 2010 quarter, although it will likely be lower than the half-year update's 0.9 percent," Treasury said.
At this stage, the outlook for about a 3 percent improvement in real economic growth in the 2011 calendar year was better than experienced in 2010 and what was expected for 2010 this time last year.
Treasury said the New Zealand dollar remained elevated on a trade weighted index basis and was not supporting the sort of export-led growth typical of recent recoveries from recession.
High prices for New Zealand's commodity exports were partly responsible, while a low cross-rate against the Australian dollar would continue to benefit non-commodity exporters.
A sensible assumption would be for the currency to hold up around current levels for much of 2011 unless commodity prices moved sharply lower. But without a sustained lower exchange rate, 2011 would be another difficult year for exporters of non-commodity goods to countries other than Australia.
The Rugby World Cup would give temporary relief to those exporting travel and transport services, Treasury said.
"We are thus unlikely to see any fundamental shift in the economy towards the tradable sector, owing to the natural constraints of expanding agricultural production, the limited size of the Australian market and the stiff competition there as other countries also face a low exchange rate against the Australian dollar."
