23 Jun 2009

Recession predicted to last well into 2010

8:20 pm on 23 June 2009

There are predictions the recession will last until well into 2010.

New Zealand Prime Minister John Key says he believes the end of the global credit crisis is in sight, though the international community has yet to recover economically.

However, Mr Key believes the domestic economy is in better shape than Reserve Bank is forecasting.

Gross Domestic Product figures for the March quarter are due to be issued on Friday. Mr Key says the central bank's forecast was minus 1% for the first quarter but believes the GDP statistics will be more positive.

But in its summary of what eight main economic forecasters are predicting, the New Zealand Institute of Economic Research says growth is expected to slump by 1.6% over the year to March 2010, compared with a 0.6% decline they were picking three months ago.

More than 60,000 jobs are expected to be lost and wage growth will be subdued for the next two years.

NZIER economist Shamabeel Eaquab told Checkpoint on Tuesday the recession will continue for the next 12 months, with increasing job losses and depressed wages.

Mr Eaquab says there are now some positive signs in the New Zealand housing market and net migration figures - but the overall picture is still bleak.

He says forecasts for the New Zealand dollar range from a drop of 16% to a gain of 4%.

On Tuesday, the Kiwi fell below US63 cents after the World Bank warned of weaker than expected global growth.

The bank is predicting the global recession will be deeper than it previously thought, with the world economy forecast to shrink 2.9% - far steeper than the 1.7% contraction it forecast just three months ago.

The World Bank says East Asia and the Pacific will be particularly hard hit, and for longer, because of trade links with developed countries.