Strong economy predicted to flag as exports fall

The economy remains strong compared with its trading partners but the roaring domestic economy will begin to weaken over coming quarters, senior economists say.

A September quarter forecast from the Institute of Economic Research shows how strong migration-fuelled domestic demand has sustained New Zealand through the worst international recession in 10 years.

Consumer confidence is still high, suggesting consumption has continued through to the September quarter, says the institute. Gross domestic product is forecast to grow 2.8 per cent in 2002/03.

But domestic demand is not expected to offset falling export revenue forever. Export volumes are still up because production responds slowly to prices, but the value of exports will be nearly $2.5 billion lower in 2002/03 than in the previous year.

In coming quarters, the institute expects job growth to ease and wages to grow more slowly. Softer consumption is expected to lift again late in the 2003/04 year as the value of exports rises in response to an improving global economy.

- NZPA