16 Jun 2015

NZIER consensus forecasts trims growth

3:58 pm on 16 June 2015

The latest survey of economic forecasters shows expectations of growth have been pared back, though growth is expected to remain solid.

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Photo: 123RF

The Institute of Economic Research (NZIER)'s consensus forecasts show growth on average of 3.3 percent in the year to March 2015, before easing to 2.8 percent and 2.7 percent in the following two years.

House building remains the key driver, although forecasters have wound back the extent of residential construction growth over 2016 and 2017.

The survey also shows strong growth in household spending, fuelled by rising incomes, strong net migration and low interest rates, but the slowdown in China and Australia presents a risk to future exports.

The survey was taken before the Reserve Bank cut interest rates, and shows inflation pressures will gradually build from next year, though inflation is not expected to reach the middle of the Reserve Bank's 1 to 3 percent target band until the second half of 2017.

Forecasters had expected the cost of borrowing to remain on hold in 2016 and 2017, and the exchange rate to remain high by historical standards.

Unemployment is expected to fall to close to 5 percent in 2017 while wage growth is expected to remain modest.

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