Inflation, export concerns for robust New Zealand economy: think-tank

Construction and tourism are helping to buffer the New Zealand economy amid fragile global growth, but the central bank might cut interest rates further in a bid to raise inflation, an independent economic think-tank said Wednesday.

Geopolitical uncertainty in Britain and the United States, along with the slowdown in the Chinese economy as it continued to rebalance, posed downside risks to the demand for New Zealand's exports, said the New Zealand Institute of Economic Research (NZIER) in its Quarterly Predictions report.

"But the outlook for key exports remains positive and domestic demand remains strong, as we expect the effects of strong population growth will continue to ripple across the sectors and regions in New Zealand," NZIER senior economist Christina Leung said.

"We continue to expect annual GDP (gross domestic product) growth will average just under 3 percent beyond 2016."

Construction would be a key driver of growth, with a solid pipeline of residential, commercial and infrastructure work, while increased flight capacity and continued low fuel prices would bring more tourists to these shores from a range of countries.

However, inflation remained subdued with the high New Zealand dollar would continue its downward pressure on the price of imported household goods over the coming year.

The NZIER expected annual inflation - currently at 0.4 percent - to edge back into the Reserve Bank of New Zealand's (RBNZ) target range of 1 percent to 3 percent in the first half of next year.

It expected the RBNZ to cut the official cash rate - currently at 2 percent - further to 1.5 percent by mid-2017. Endit