Forecasters' expectations weaken with global gloom

Photo / Kenny Rodger

Economic forecasters are expecting a slower recovery than they were three months ago, the New Zealand Institute of Economic Research has found.

Among the nine forecasting agencies surveyed, the consensus forecast for gross domestic product growth in the year to March next year has been revised down to 2.1 per cent from 2.6 per cent in the previous survey, and growth in the year to March 2013 to 3 per cent from 3.7 per cent last time.

In fact for the year ahead, of the 17 indicators NZIER asks its fellow forecasters about, only one has not been revised down - the unemployment rate, up from 5.2 to 5.8 per cent.

The weaker growth prospects reflect a darkening global outlook and a later rebuild in Canterbury, NZIER said.

Growth over the next three years is expected to average 2.7 per cent, but would be 2.2 per cent without the Canterbury rebuild.

Household spending is expected to remain subdued, with private consumption growth picking up gradually from 1.9 per cent this year to 2.3 per cent in 2013/14.

This was consistent with a modest outlook for job creation and income growth, the institute said, and compared to an average 4.4 per cent growth in the five years before the recession.

The outlook for exports is also more subdued than in the September poll because of a weaker global economy and an exchange rate that is still high.

In line with the economy, employment growth in the current and coming years has been revised down, to 1 per cent (from 1.7 per cent) and 1.9 per cent (from 2.5 per cent).

The flipside is a lower inflation track, averaging 2.4 per cent over the next three years, and a correspondingly lower profile for short-term interest rates.

Forecasters on average expect the 90-day bank bill rate to rise from 2.8 per cent in the March 2012 year to 3.2 per cent in 2013 and 4.2 per cent in 2014.