17 Sep 2012

Economic recovery will be slower - NZIER

8:51 pm on 17 September 2012

A fresh economic forecast is pouring cold water on Government hopes of returning to surplus by 2015.

The report from the New Zealand Institute of Economic Research says the economic recovery continues but will be more protracted than expected, with muted job and wage growth over the next few years.

It warns the exchange rate will stay higher than expected for longer, while interest rates won't begin rising until late 2013.

It also warns of greater global risks and that export sales will to weaken as demand softens.

The report says the slower recovery will reduce tax revenue affecting the Government's target of a return to surplus in three years.

It forecasts growth of 2.6% over the next three years with the Christchurch rebuild a key driver. And the economists have trimmed the growth outlook for the year to March 2014 to 2.9% from 3.1%.