Rebuild boosts growth forecasts

Engineers prepare the internal pressed copper dome from the Catholic Cathedral for removal from the Basilica. Photo / Simon Baker

The boost from the reconstruction of Christchurch outweighs a global slowdown forecast for the economy over the next year or two.

The quarterly survey of 11 private and public sector forecasting operations, done by the New Zealand Institute of Economic Research (NZIER), found the consensus for economic growth somewhat stronger for the year to March 2012 - 2.6 per cent, against 2.1 per cent in the June survey.

But it is slightly weaker for the following year at 3.7 per cent, compared with 4 per cent in June.

Export growth forecasts for this year and next year are down, but exchange rate predictions have risen.

"The Canterbury reconstruction will be a sizeable stimulus, particularly to the construction sector, but economists are uncertain on the actual timing and speed of reconstruction," said NZIER principal economist Shamubeel Eaqub.

Forecasts for residential building growth in the year to March 2013 ranged from 24 to 59 per cent. Without the rebuild, overall growth for the next three years would average 2.7 per cent, instead of the 3.1 per cent expected.

Employment growth forecast for the March 2012 year has improved to 1.7 per cent from 1.3 per cent in the previous survey, rising to a strong 2.5 per cent for next year.

"This will flow through to wage growth, accelerating from 3.2 per cent in the March 2012 year to 3.8 per cent in March 2014. This translates to about 1 per cent in real wage gains, after allowing for living cost increases, and should support household spending."

The economists expect inflation to remain around 2.7 per cent over the next three years, near the top of the Reserve Bank's target band.