KEY POINTS:
Business & Economic Research Ltd (Berl) has stuck to its near-term economic growth predictions, despite "dark clouds from abroad" amassing.
"Nevertheless, the impact of a global 'credit crunch' scenario should be neither over-played, nor under-played," senior economist Ganesh Nana said.
"The danger is the ease with which sound and balanced analysis can be overtaken by doubt, fear, uncertainty and anxiety in this new climate."
In its September quarter forecasts, Berl expects growth to average 2.6 per cent in the March year, with 2.5 per cent and 2.8 per cent expansions in the following two March years.
Nana said the principal drivers of recent growth - employment, migration, infrastructure investment and booming terms of trade - would remain over the forecast horizon.
"Gloom from financial sector turmoil needs to be balanced against strong terms of trade [dairy and log commodity prices], uninterrupted growth in China and India, continued infrastructure investment and resilience in the manufacturing sector still citing skill shortages as constraints on their businesses."
Nana said it was clearly the task of monetary authorities to ensure imprudent lending decisions by a relative few did not infect the otherwise sound economic activities of the many.
He does not expect any easing in interest rates until mid-2008 and even then higher oil and food prices could well be used as excuses to further delay such interest rate relief.
He expects the New Zealand dollar to decline quickly through next year and for the trade-weighted index to fall under 60 by late 2008.
- NZPA
