17 Dec 2013

NZ economy expected to grow strongly over next two years

7:38 am on 17 December 2013

The New Zealand economy is expected to grow strongly over the next couple of years.

The Institute of Economic Research's survey of economic forecasts by various financial and economic agencies is picking broad-based annual growth picking up from 2.8% in March next year to more than 3% the following year.

The institute's principal economist Shamubeel Eaqub says the degree of uncertainty around the outlook has greatly reduced.

He says typically when there is a lot of uncertainty there will be divergence in forecasts of economic growth, but by and large most economic forecasts are very optimistic and pointing toward an economy that will do better in 2014 and 2015.

Mr Eaqub says the inflation rate will pick up as the economy does and businesses have to raise prices, and the consensus view is that interest rates will have to rise from early next year to cool some of those pressures.

He says inflation has tended to average around 2.5% when the New Zealand economy is growing at a good rate.

Mr Eaqub says residential construction is forecast to grow almost 20% a year for the next couple of years, and the strong growth is broadening beyond Canterbury.