10 Oct 2012

NZ growth to outstrip other advanced economies

11:30 am on 10 October 2012

New Zealand's economy is expected to grow more than 3% next year, unlike most other developed economies, which are at risk of recession.

The International Monetary Fund has cut its global growth forecast for 2012 to just 3.3%, making it the slowest year of growth since 2009, the peak of the financial crisis. In 2013, growth would rise modestly to 3.6%.

Both New Zealand and Australia are forecast to grow at twice the rate of other advanced economies next year.

The IMF has slightly pulled back its forecasts for the New Zealand economy, predicting it will expand 2.2% this year and 3.1% in 2013, partly boosted by rebuilding plans in Canterbury.

New Zealand's expected growth next year compares well with Europe and the United States, which are in the grip of fiscal crises.

Westpac Bank senior economist Michael Gordon says the downside is the dollar will remain strong, hurting exporters and putting the brakes on any recovery.

He says the sluggish global economy will make it difficult for New Zealand to get traction.

US, Europe growth slow

The IMF projected US growth would be a little more than 2% this year and next, and forecast a contraction in the euro area this year by 0.4% and modest growth in 2013 of 0.2%.

IMF Chief economist Olivier Blanchard says low growth in advanced economies is having a significant trade impact on emerging nations like China and Brazil.

He says the US and Europe need to fix their economic ills as failing to do so would prolong the slump.

Emerging markets are still expected to grow four times as fast as advanced economies, but the IMF cut estimates for India and Brazil, with the latter now seen growing slower than the United States this year.

It also cut its expectations for China but warned against being overly pessimistic about the prospects of these economies, which were major engines of growth in the global financial crisis.

China, the world's second-biggest economy, would grow 7.8% this year and 8.2% in 2013.

Competition, environment key, say opposition

Labour Party finance spokesperson David Parker says New Zealand's growth will be held back until the country gets exporters into a competitive position to enable them to employ more people.

Mr Parker told Radio New Zealand's Morning Report programme New Zealand could be doing much better and is one of the few countries in the developed world not manipulating its currency to control its economy.

Green Party co-leader Russel Norman says New Zealand needs to make the most of its advantages in environmental performance to get good economic performance.

He says the country also needs to make itself less vulnerable to price shocks from oil prices by building fewer roads and using other methods of transport.