Forecasters expect growth of 3.1pc

Forecasters are taking a modestly rosier view of the economic outlook than three months ago, according to the latest consensus forecasts gathered by the New Zealand Institute of Economic Research.

The average forecast for gross domestic product growth over the year to March 2011 is 3.1 per cent, up from 2.8 per cent in the December poll.

"The range is wide, however, from a paltry 1.8 per cent to a flourishing 4.1 per cent," said NZIER principal economist Shamubeel Eaqub.

Forecasts for the following year have also improved to 3.2 per cent from 3 per cent in the December poll.

Underpinning the improvement is a stronger, but still plodding, forecast for private consumption - which is about 60 per cent of the economy - and for both exports and imports, but a less optimistic view of residential construction.

Unemployment, at 7.3 per cent, is regarded as at its peak and set to decline gradually to 6.2 per cent over the next two years.

Expectations of wage growth have been pared back, compared with three months ago, to 1.9 per cent over the year ahead before picking up to 2.6 per cent the year after.

This implied that real wages would fall over the year to March 2011 and remain flat the following year, which might dampen a recovery in consumer spending, Eaqub said.

Investment, after contracting, it is thought, by nearly 11 per cent over the past year is expected to increase 6.1 per cent over the year ahead.