10 Jun 2014

IMF spells out risks to economy

8:55 pm on 10 June 2014

The International Monetary Fund has warned that rising house prices and slowing demand for goods from China are the main risks to New Zealand's expanding economy.

In its final report following a visit earlier this year, the IMF forecasts economic growth will peak at 3.5 percent this year, before declining to about 2.5 percent over the next few years.

The report says the economy is stronger than in previous years, but warns Auckland's heated housing market and a sharp slowdown in China could still pose a threat to growth.

While the growth in house prices has eased slightly due to lending restrictions, the IMF says it could still damage the financial system if there's an economic shock.

The IMF also says a sudden slowdown in China could hurt the economy, though it doesn't believe that is imminent.

It says the country's low savings rate needs to be addressed, and has endorsed the Government's debt reduction plan to ensure the country is in good shape to withstand any nasty shocks in the future.

Finance Minister Bill English said the Government was focused on keeping a lid on spending to protect the economy.