Economic recovery still fragile: BNZ

The BNZ is sounding a cautious note on the state of the economy.

In its latest review, the bank says there are still a large number of risks, despite signs of a recovery. It believes the expected expansion this year should be seen as fragile.

Senior Economist Craig Ebert says there is still a lot of debt and financial stress, even though some economic data has been looking more positive.

"There's a deeper sense that there's a lot more to probably come to the surface. We think there will be a recovery, but we're also warning that there could be some potholes on the way."

Ebert does not believe growth will be strong enough this year to reduce unemployment by much. In the fourth quarter of last year, a net 2,000 people lost their jobs, which was a substantial reduction on the average 17,000 a quarter over the previous nine months.

The BNZ predicts that by the second half of this year, job growth will return to the economy however the unemployment rate will stay above seven per cent until next year, keeping a cap on wage growth.

Nonetheless, the BNZ believes 2010 will be a better year than 2009 and 2011 will be better still.

The report says expectations for global growth continue to be raised with the world now expected to expand by 3.2 per cent this year, a significantly more robust expectation than the 1.9 per cent view when forecasters were at their most pessimistic.

The survey says the news for New Zealand exporters is even better as the country's trading partner basket is heavily influenced by Asia and Australia. Trading partner growth is expected to average 3.9 per cent per annum over the next few years.

- NEWSTALK ZB