20 Mar 2012

Consensus forecast predicts weaker than expected recovery

8:20 am on 20 March 2012

A survey of economic forecasts is expecting the recovery will be weaker than expected over the coming year, because of delays to repairing the earthquake-damaged Christchurch.

The Institute of Economic Research's consensus forecast shows growth on average of 1.8% in the year to March down from the previous prediction of 2.1% in December's survey.

The institute says the main driver is the rebuilding of Christchurch, which is expected to start later and take longer to fix than previously thought, and is estimated to cost about $20 billion.

The survey also shows that restrained growth in household spending and a slowdown in public spending will limit growth, while a higher New Zealand dollar will keep prices low, easing inflation pressures.

Growth is expected to pick up to 2.7% in the March 2013 year, and 3.2% the year after compared with 3% for both years in the previous survey.

The survey found increased optimism about the global economy and exports, as concerns about the eurozone debt situation eased.

However, analysts expect the current account deficit to start deteriorating again because of weak domestic savings and predicts it will take the Government longer to get the budget back to surplus.