KEY POINTS:
The New Zealand economy is being hit by a salvo of negative factors and is in recession , the New Zealand Institute of Economic Research said today.
In its quarterly predictions report the NZIER said gross domestic product was likely to decline for three consecutive quarters. A decline in growth for two consecutive quarters is defined as a recession.
In the March 2008 quarter GDP declined by 0.3 per cent.
The NZIER cited its Quarterly Survey of Business Opinion as evidence that the economy would decline in both the June and September quarters.
But it went on to say "we believe the bottom of the cycle has been reached".
The current recession was unusual in that it was spread across the consumption, investment and external sectors of the economy.
"The economy has been hit was a salvo of self-inflicted and external negative factors," NZIER said.
But increases in energy and food prices appeared to be past their peak and interest rates had started to ease.
Wage growth would remain high and the October tax cuts would boost private consumption.
A recovery to robust economic health would not be quick as inflation was still a problem.
"We are likely to have relatively high interest rates for some time and this will tend to support the value of the currency and constrain investment and job growth," NZIER said.
- NZPA
