KEY POINTS:
The Treasury is likely to slash its forecast for economic growth when it provides its next update, its chief, John Whitehead, says.
The incoming Key Government received a gloomy assessment a fortnight ago, but Mr Whitehead, who travelled to Peru with the Prime Minister for the Apec summit, said the half-yearly update next month would be even worse.
Its forecast for the year to March 2009 was for 0.4 per cent growth, but that was likely to be slashed to near zero because of the shrinking world economy.
"Our forecast we presented to the incoming Government after the election was at a very preliminary stage," Mr Whitehead told Radio New Zealand. "We're certainly working through those, reassessing our view of the world economy and the fiscal implications of that.
"On the economic outlook, I think we would certainly, like many others, be adjusting our outlook downwards quite frankly at the moment."
He blamed the deteriorating world economy for the gloomy picture, which included unemployment jumping from its present 4.2 per cent to past 5 per cent.
But Mr Whitehead said low Crown debt gave the Government some leeway to offset the negative economic conditions and the Reserve Bank had plenty of room to stimulate the economy by cutting official interest rates.
Economists predict the Reserve Bank will cut rates by a full percentage point next week, with some wanting a record 1.5 percentage point cut.
- NZPA
