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Recovering, but clear and present dangers
9 June 2010
NZIER (the New Zealand Institute of Economic Research) today released its June 2010 Quarterly Predictions – a comprehensive commentary on the New Zealand economy and forecasts covering the next five years. “The New Zealand economy is recovering. But dangers are clear and present. The current global financial, political and social turmoil are the key risks. We believe there is no urgency for the RBNZ to raise interest rates in this environment. A gradual hiking programme from September would allow time to gauge the impact of the current risk flare, a preferable option to rushing rate increases that may have to be reversed,” NZIER’s Principal Economist Shamubeel Eaqub said. The economy is more fragile than meets the eye. While confidence measures are very optimistic, household spending is still stagnant. The recent economic boost from migration is also fading, as emigration to Australia accelerates. Export performance is only now beginning to stage a broad based recovery – until recently much of the strength was concentrated in dairy and forestry.