Investment spending beats exports as driver of growth

Business investment spending has overtaken exports as a driver of New Zealand's economic growth, says a quarterly economic forecast.

Business and Economic Research (BERL) said business investment last year was nearly 16 per cent of real GDP, its highest level since the mid-1980s. Government investment spending had also been rising.

With a variety of building projects around the country, and renewed interest in road construction, there was little reason why investment would not keep leading growth, said BERL senior economist Ganesh Nana.

Concerns about cost increases were the main obstacle.

BERL believes annual economic growth in GDP will fall to a low of 1.9 per cent in the 12 months to March next year, rising to 2.9 per cent in the 12 months to March 2009.

But the nation's current account deficit would remain its Achilles heel.

BERL saw only modest scope for an immediate rise in exports in response to recent falls in exchange rates, because meat, forestry and horticulture would be limited by planting decisions and stock numbers.

- NZPA