29 Aug 2012

Economic recovery patchy - NZIER

9:32 am on 29 August 2012

An economic forecaster predicts the economic recovery will be patchy due to a focus on repaying debt by households and the Government, and uncertainty about the size and timing of the rebuilding of Christchurch.

The Institute of Economic Research's quarterly prediction forecasts growth of 1.7% for 2012, picking up by 1% next year.

Its growth prediction for this year is slightly stronger than in its previous report, due to figures on higher consumer spending.

But the NZIER warns spending will be curbed by an ongoing determination to keep debt down, or, in the Government's case, by its goal of returning to surplus by 2015.

It says the slowing global economy is the biggest risk to the outlook, with the European debt crisis having a knock-on effect on New Zealand's key trading partners Asia and Australia that could hurt exports.

The institute is also expecting the drought crisis in the United States to not only boost global grain prices but also raise the price of dairy and meat in the longer term and hit consumers wallets in the supermarket.

It says grain and crude oil prices have risen sharply recently, and if these higher prices continue they could hold back the country's economic recovery.