Forecasters take rosier view

Economic forecasters are taking a slightly rosier view of the outlook than they were three months ago, the New Zealand Institute of Economic Research's June consensus survey has found.

The 10 institutions surveyed, on average, expect gross domestic product to grow 3.2 per cent over the year ending March next year and 3.3 per cent the year after, up from 3.1 and 3.2 per cent respectively in the March survey.

There was a broad consensus that the economy is rebalancing from consumption and housing towards exports and returning to trend growth rates.

But there was considerable divergence of views on the exchange rate, the current account deficit and the residential construction sector.

Unemployment is expected to improve from 6 per cent now to 5.3 per cent by March 2012, but wage growth is picked to be slow (1.5 per cent) over the year to March 2011 before accelerating to 3 per cent the next year.

Investment, after two years of contraction, is expected to rebound strongly over the next two years.

Forecasts of export growth have been revised up sharply, with 3.5 per cent now expected in the year to March 2011 (up from 2.7 per cent three months ago) and 5.3 per cent (from 5.1 per cent) the year after.

Imports are expected to grow faster, suggesting the trade balance's recent return to the black may prove transitory. The average forecast for the current account deficit in March 2012 is $8.8 billion but estimates range from $2 billion to $13 billion.