Economists cut NZ growth forecasts: NZIER

A slower rebuild in Christchurch means the predicted construction industry boost may also be delayed. File photo / Northern Advocate

Economists have cut their growth forecasts for the next two years as the global economic outlook and a slower Christchurch rebuild weighs on New Zealand's recovery.

The economy will grow 2.2 per cent in the year ended March 2012 before accelerating to 3 per cent in each of the following years, according to New Zealand Institute of Economists consensus forecasts.

That's down from 2.6 per cent forecast for the 2012 year, followed by annual growth of 3.7 per cent and 2.9 per cent in 2013 and 2014 respectively, in the September survey of financial institutions.

"A darkening global economic outlook and a later rebuild in Canterbury were the two key drivers of a weaker economic outlook," the report said. "A weaker economy and subdued inflation mean economists now expect the RBNZ (Reserve Bank) to raise interest rates later and more gradually."

The survey follows NZIER's own quarterly predictions earlier this month, which gave a break-up of the European common currency a one-in-four chance and forecast growth of just 1.5 per cent in 2012, accelerating to 2.5 per cent in 2013.

The respondents said the Canterbury rebuild will be the key driver behind an average 2.7 per cent annual growth over the next years, and stripping out that injection, the economy will expand an average 2.2 per cent.

That should underpin residential construction, which will be weak in the March 2012 year as it shrinks 10.1 per cent, before growing 34.1 per cent in 2013, according to the survey.

Business investment is expected to grow at slightly slower rate than previously forecast, up 7.2 per cent in 2012, 8.1 per cent in 2013, and 6.6 per cent in 2014. That compares to the September forecast of 8.3 per cent, 10.2 per cent and 6.4 per cent in the respective years.

Economists pared their expectations for export growth since the September survey due to the weaker global economic outlook and New Zealand's persistently high currency. Exports are tipped to grow 2.7 per cent in 2012, 1.6 per cent in 2013 and 3.1 per cent in 2014, down from 3.2 per cent, 2.8 per cent and 3.3 per cent respectively.

That slowdown in the economy will likely hit employment, with growth of 1.1 per cent, 1.9 per cent and 1.8 per cent over the coming three years, compared to expansion of 1.7 per cent, 2.5 per cent and 1.7 per cent.

Economists pared back inflation expectations to an average 2.4 per cent over the next three years, down from 2.7 per cent forecast in September.

ANZ National Bank, ASB Bank, Bank of New Zealand, Deutsche Bank, First NZ Capital, Goldman Sachs, NZIER, the Reserve Bank, the Treasury, UBS and Westpac all participated in the survey.