New Zealand 2008 Economic Growth Forecast Rev. Down To 1.3%, Sees Higher Inflation

Sep 4, 2007 - The New Zealand economic growth forecast was revised down to 1.3% in the year to March 2008, the latest report from the New Zealand Institute of Economic Research - NZIER indicated Tuesday. Annual average growth rate was initially estimated at 2.1% in the year to March 2008. The institute predicts 1.5% growth in the year to March 2009. The lower growth expectation was largely due to slowdown in private consumption growth.

The annual growth rate over the first five years ended March 2007 was 3.4%. The institute sees the second half of 2007 and the first half of 2008 to be the period of slowest growth since 2000-01. The growth would rise gradually to 3.6% by the March 2011.

The report added that on per head of population basis, growth would be below 1% in the next two years and 0.4% in the March 2008. Further, the growth would be 0.7% in the March 2009 year.

NZIER forecasts that consumer price inflation would rise sharply later this year from its current rate of 2.0%. Inflation would breach the central banks' medium term target range of 1%-3% in the December quarter and peak at 3.5% in March 2008. The inflation would not return to be within the band until the end of the 2008 calendar year.

The report added that the Reserve Bank raised the Official Cash Rate by 1.0% to 8.25%. The institute said, “The Reserve Bank is in a very difficult position with the inflation outlook not good, the economy already growing slowly and its main policy instrument, interest rates, already at a level that should be significantly contractionary.”