Economy heading for worst year since 1992

Tuesday 16th December 2008

New Zealand's economy will shrink 0.2% in the 12 months ending March 31, the weakest since 1992 on a slump in housing and rising unemployment, according to a survey by New Zealand Institute of Economic Research.

Economists in the survey cut their average estimate from the growth of 0.2% they were predicting three months ago. The economy will resume its expansion in 2011, with a 3% annual pace, according to the survey, posted on the NZIER website.

Private consumption is expected to have shrunk 0.3% this year from growth of 3.3% a year earlier. The rate of residential investment probably tumbled 19.9%, the survey said.

The domestic economy contracted in the first half of the year and economists predict it shrank in the third quarter by 0.4%, according to a Reuters survey. The slump and prospects of further weakness in the face of the worldwide recession spurred the central bank to cut the official cash rate to 5 percent. Governor Alan Bollard predicts a mild pick-up in growth next year in 2009.

By Jonathan Underhill

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