31 Jan 2011

Treasury confident economy will grow in 2011

4:58 pm on 31 January 2011

The Treasury is confident its last major update on the New Zealand economy remains appropriate despite mixed economic news since.

It says the outlook for 2011 is not materially different from its December Half Year Update.

Figures released on Monday morning showing record low December building consents were the latest in mixed news for the economy.

Statistics New Zealand figures show 994 consents were issued, the lowest for any month since records began in 1965. On a seasonally adjusted basis, consents fell 18% in December, following a 7% increase in November.

It follows reports that the economy unexpectedly contracted in the third quarter of 2010.

But the Treasury says further gains in the terms of trade are possible in 2011 after they rose faster last year than in any year since the 1970s.

As a result, the Treasury expects the economy to grow by 3% this year, double last year's growth of 1.5%.

It also says New Zealanders appear to be saving more than it forecast in December and expects spending this year to increase in line with incomes, which should benefit from an improving jobs market.