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BusinessDesk: Darker global economy, slower Christchurch rebuild sap local recovery: NZIER survey

BusinessDesk: Darker global economy, slower Christchurch rebuild sap local recovery: NZIER survey

Economists have cut their growth forecasts for the next two years as the global economic outlook and a slower Christchurch rebuild weighs on New Zealand’s recovery.

The economy will grow 2.2% in the year ended March 2012 before accelerating to 3% in each of the following years, according to New Zealand Institute of Economists consensus forecasts. That’s down from 2.6% forecast for the 2012 year, followed by annual growth of 3.7% and 2.9% in 2013 and 2014 respectively, in the September survey of financial institutions.

“A darkening global economic outlook and a later rebuild in Canterbury were the two key drivers of a weaker economic outlook,” the report said.

“A weaker economy and subdued inflation mean economists now expect the RBNZ (Reserve Bank) to raise interest rates later and more gradually.”

The survey follows NZIER’s own quarterly predictions earlier this month, which gave a break-up of the European common currency a one-in-four chance and forecast growth of just 1.5% in 2012, accelerating to 2.5% in 2013. The respondents said the Canterbury rebuild will be the key driver behind an average 2.7% annual growth over the next years, and stripping out that injection, the economy will expand an average 2.2%. That should underpin residential construction, which will be weak in the March 2012 year as it shrinks 10.1%, before growing 34.1% in 2013, according to the survey.

Business investment is expected to grow at slightly slower rate than previously forecast, up 7.2% in 2012, 8.1% in 2013, and 6.6% in 2014. That compares to the September forecast of 8.3%, 10.2% and 6.4% in the respective years. Economists pared their expectations for export growth since the September survey due to the weaker global economic outlook and New Zealand’s persistently high currency. Exports are tipped to grow 2.7% in 2012, 1.6% in 2013 and 3.1% in 2014, down from 3.2%, 2.8% and 3.3% respectively.

That slowdown in the economy will likely hit employment, with growth of 1.1%, 1.9% and 1.8% over the coming three years, compared to expansion of 1.7%, 2.5% and 1.7%. Economists pared back inflation expectations to an average 2.4% over the next three years, down from 2.7% forecast in September.

ANZ National Bank, ASB Bank, Bank of New Zealand, Deutsche Bank, First NZ Capital, Goldman Sachs, NZIER, the Reserve Bank, the Treasury, UBS and Westpac all participated in the survey.

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11 Comments

The economy will grow 2.2% in the year ended March 2012 before accelerating to 3% in each of the following years, according to New Zealand Institute of Economists consensus forecasts. That’s down from 2.6% forecast for the 2012 year, followed by annual growth of 3.7% and 2.9% in 2013 and 2014 respectively, in the September survey of financial institutions.

And lower than Treasury's PREFU forecasts of 2.5%, 3.7% and 3.1% for March years 2012, 2013 and 2014. Anyone taking bets for a return to surplus by 2014?

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Deficits in 2014, will be record breakers.  Politicians can't tell the truth or they wouldn't get elected.  None of this is news, nothing is changeing except perspective. 

When you incentivise lying, that is what you get.

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What disappoints me is that no journalist has been prepared to directly ask Key, English or their Labour equivalents if they personally believe and trust Treasury's PREFU forecasts.  

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Needless to say, domestic steelmakers, who better than anyone know the state of domestic end product demand, have seen the writing on the wall, and have one message for the world: short Brazil and Australia. 

http://www.zerohedge.com/news/forget-copper-steel-true-indicator-chinese-hard-landing 

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Oh growth predictions in dream land again? What a surprise. Lets introduce accountability for all politicians and public servants in the form of publically aired corporal punishment when they fail to deliver.

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Westpac advice today:   "Fixed mortgage rates are currently good
value given where we think floating rates are heading over the
next several years. With no satisfactory resolution to the European
debt crisis in the offing, there is no immediate pressure on fixed
rates to rise, so borrowers can afford to wait a little longer. But the
RBNZ’s latest Statement made clear that there is limited scope for
fixed rates to fall further. A situation where the RBNZ saw fit to cut
rates would also probably be one where banks’ funding spreads are
increasing sharply."

Hmmm ... with mortgage currently in 6 segments all on floating, methinks it might be a good strategy to start fixing for 12 months  (5.59), - fix one segment every 2 months or so -  thus spreading the risk (&insurance). 

Whaddaya think all you financial whizzkids?  ( please Doomsday specialists no comment - yes, we know the global economy is doomed, the dollar has died, & oil running out etc...but life goes on  -  last time I checked, creditors, suppliers still wanted their bills paid, & I don't feel like living on the street with wife, 3 kids & dog quite yet)

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Depends on what downside you can afford/ live with. I see fixing like insurance... you take it  when you can't swallow the potential loss. 

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Most of us with floating mortgages can easily take a hike to 6.5/7% without change as our repayments are set as per previous higher rates.  So a few rate rises won't make a difference to the dollar repayment amount.     Now 10% - that would be a bad thing!    Can't see that happening unless the whole interbanking thing seizes up  -   in which case the RB would have to start dishing it out anyway.       Maybe we'll just keep floating for now ....  

 

 

 

 

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Declining interests rates is a very bad sign for real estate, generally.  It doesn't create much demand, as much as they try.  Skudiv beat me with his posting on iron ore.  Good job.

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Declining interests rates is a very bad sign for real estate, generally.  It doesn't create much demand, as much as they try.  Skudiv beat me with his posting on iron ore.  Good job.

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Everybody is paying too much to service their debt.  As more and more properties go underwater against their debt, you will see more and more families lose their homes as they don't have the money to pay an agent to sell their home, or pay to move.  Cash poor.  Time to rent and wait a few years. 

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