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Canterbury rebuild drives NZ growth in 2012, global risks stay Bollard's hand

Monday 19th September 2011

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Economists have lifted their estimates for economic growth in the year ending March 31, 2012, based on a surge in residential construction as Canterbury’s rebuild gets under way.

The economy will accelerate to a 2.6% annual pace in the current year, from 1.5% in the year ended March, according to the NZIER Consensus Forecasts. That’s up from the 2.1% growth forecast in the June quarter survey. Estimated growth in 2012, however, is lower, at 3.7% from 4%.

Economists have pushed back the timing of the impact of Canterbury’s rebuild but still forecast a big jump in residential construction in the 2013 year, at 39.8%. Home building is seen easing back to 9.8% growth in 2014.

Official statistics this week are expected to show the economy grew 0.5% in the second quarter, slowing from the first quarter’s 0.8% pace, for an annual rate of 1.5%, according to a Reuters survey.

As well as the Canterbury reconstruction, economists are betting growth in the second half of calendar 2011 will get a boost from the 95,000 visitors here for Rugby World Cup.

Economists expect New Zealand will prove resilient in the face of global uncertainty, which hasn’t yet impacted on forecasts, the survey says. Over the next three years, economic growth is expected to average 3.1%, or 2.7% excluding activity in Canterbury, the NZIER survey says.

Estimates for export growth have been trimmed to 3.2% in the year ending March 2012, from the 4% rate forecast three months ago, partly reflecting a more fragile global economy and a kiwi dollar expected to stay higher for longer.

The trade-weighted index is expected to average 71.1 in the current March year, up from the 67.6 level predicted three months ago. The TWI is also seen averaging 71.1 in 2013, before slipping to 68.8 in 2014.

The 90-day bank bills would average 3% in the current year, rising to 4.1% in 2013 and 4.8% in 2014, the survey shows. That suggests economists expect the Reserve Bank to begin lifting the official cash rate in early 2012, NZIER said.

Inflation would average 2.7% over the next three years, near the top of the central bank’s 1%-to-3% range.The current account deficit is expected to widen to $8.66 billion in the year ending March 31, 2012, and to $11.8 billion in 2013 and $13.77 billion in 2014.


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