23 Dec 2012

US agreement important for NZ - economist

5:59 am on 23 December 2012

BNZ chief economist Tony Alexander says it's vital for New Zealand's economic prospects that the fiscal cliff budget crisis in the United States is resolved before the end of the year.

If it is not, a set of harsh spending cuts and tax rises will take effect in January, which is likely to send the United States back into recession.

Mr Alexander said that would deal a major hit to growth worldwide. Another US recession would create widespread uncertainty - which would likely push the New Zealand dollar down.

Mr Alexander said sharemarkets and commodity prices would also fall.

He said it is still possible an agreement could be reached in Washington or that any losses could be curtailed early in the New Year.