25 Jun 2010

Recovery remains at risk - economist

5:50 am on 25 June 2010

A leading economist is warning that the economic recovery remains at risk unless business investment picks up over the next few quarters.

Official figures show that Gross Domestic Product, the broadest measure of the health of the economy, grew by 0.6% in the first three months of the year.

The main contribution came from the manufacturing, forestry and logging and wholesale trade sectors, which offset weak business investment and subdued household spending.

Although the recovery is now a year old, ANZ Bank senior economist Khoon Goh says it's taking much longer than it did after previous downturns, with the country recouping only half the the losses during the period.

Mr Goh says a recovery is under way but it's patchy, and the figures indicate firms remain uncertain about the right time to invest profitably in their businesses.

The Reserve Bank is likely to continue raising interest rates to 3.5%, Mr Goh says, before pausing to see what effect the rises are having on the economy.

On an annual basis, the economy contracted 0.4%.