Westpac trumps pack with 3.5 per cent growth pick

Westpac economists are stepping out of the pack and predicting the economy will rebound next year with the same kind of enthusiasm seen in the past.

Westpac is forecasting 3.5 per cent growth in the 2010 calendar year, and in a note yesterday pointed out that was the highest prediction among 16 economic forecasters by some margin.

The next-highest forecast is 3 per cent, the mean is 2.4 per cent and the lowest a measly 1.3 per cent, while the Reserve Bank plumped for 2.5 per cent.

And despite the Westpac prediction being so far out on its own, its chief economist, Brendan O'Donovan, and research economist Dominick Stephens said the risks to their forecast for next year were that it could be too low.

This country tended to experience "very high" growth in gross domestic product in the years following recession, and there was no reason to suppose this time would be different, the economists said.

However, they did acknowledge there were some aspects of the economy that people could point to as being different from the past.

They included the fact that the exchange rate had not stayed low for long, there had been a dramatic global financial crisis, "NZ Inc" had a record level of indebtedness, and the damage to the secondary finance sector would limit the availability of property and equipment finance.

But among offsetting factors, the exchange rate was higher because commodity prices had rebounded much more quickly than normal after a global downturn, the Westpac economists said.

The world was also no longer so United States-centric, with strong growth in demand from emerging markets, while the response to the global crisis had been extraordinary fiscal and monetary policy stimulus around the world.

HEALTHY SIGNS
Westpac economists pointed to factors seen before previous strong recoveries:
* Asset prices, particularly housing and equities, had rebounded strongly.
* The country was experiencing a mini migration boom.
* Forecasts of global activity continued to improve.
* Leading indicators, such as business and consumer confidence, were strong.

- NZPA