21 Nov 2009

Debt, dollar could hamper NZ recovery - OECD

8:06 am on 21 November 2009

A report from the Organisation for Economic Cooperation and Development (OECD) warns New Zealand's economic recovery could yet be hampered by private debt, the high dollar and rising unemployment.

The organisation's economic outlook says New Zealand is finally emerging from its five-quarter long recession, partly as a result of strong domestic and global policy stimulus.

Given that private demand is still weak and fragile, the report says, monetary and fiscal policies should remain expansionary for the time being.

However, the report says if the recovery takes hold as projected, stimulus should start to be withdrawn from mid-2010 to encourage export production, rather than housing, as the main generator of income and wealth.

Recovery in 30 OECD countries

The organisation says economic recovery is spreading faster than thought, with the world leaning on Asia and particularly China for growth.

It expects its 30 member countries to experience growth of 1.9% in 2010, compared to the less than 0.7% it was predicting a few months ago, the BBC reports.

But it warns the recovery is "timid" and spiraling Government debts and unemployment could still blow global economies off course.

The OECD's chief economist, Jorgen Elmeskov, says many of the stimulus packages and interventions put in place during the economic crisis have helped.

Mr Elmeskov says they could be harmful if they remain in place for too long, and countries should outline their strategies for removing them.

The main danger for rich countries is unemployment, according to the OECD's economic outlook.