Global growth to buffer economy

Continued strong growth in overseas economies, particularly in Europe, Japan and China, should provide a buffer preventing the slowing New Zealand economy from tipping into recession, the country's largest fund manager says.

AMP Capital Investors, which manages more than $10 billion, said international growth assets, including equities and property, had been the standouts in its investment portfolio during the three months to December.

Senior portfolio manager Grant Hassell yesterday expected global economies to continue growing reasonably strongly. "We think that the powerhouses will be Europe, Japan and China," he said.

Hassell said AMP believed growth in global economies was going to be synchronised this time around. The outlook wasn't as positive for New Zealand, where high interest and exchange rates and low consumer and business confidence would see the economy "stepping out of phase with the rest of the world".

However, Hassell believed the growth offshore would offset some of New Zealand's economic woes.

"That's probably the thing that's going to keep New Zealand out of a recession."

Hassell was picking New Zealand's growth to slow to around 1 per cent although he was not completely ruling out a recession.

If growth did slump into negative territory, it would not be by much or for long.

"It's hard to imagine New Zealand going into a bad recession when global growth is looking so good."

New Zealand's soft growth outlook was no surprise to AMP, which had gone underweight in New Zealand equities in favour of global markets some months ago.

Hassell said the "very, very good" December quarter had rounded out a "really excellent year" for investors who were prepared to take on risk.

AMP's balanced fund returned 2.8 per cent for the quarter and 12.79 per cent for the year. But its high-risk diversified fund had a return of 3.49 per cent and 16.78 per cent. The low- risk diversified equity fund returned 2.22 per cent and 9.76 per cent.

International growth assets had been the standouts during the quarter and the year. Global property delivered nearly 20 per cent for the year, while active global equities returned 21.22 per cent.