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OECD urges New Zealand to tackle economic inequalities

Xinhua, November 29, 2016 Adjust font size:

A report from the OECD Tuesday warned growth in the New Zealand economy is expected to slow, but the government should tackle "inequalities and exclusion."

The economic forecast from the OECD (Organisation for Economic Co-operation and Development) said recent strong economic growth was projected to moderate to less than 3 percent in 2018.

"Both net migration and expenditure on the Canterbury earthquake rebuild are expected to slow gradually, slowing domestic demand, especially construction activity," said the forecast.

"Growth will continue to be driven by tourism, with dairy price increases providing a further boost to incomes through the terms of trade."

Inflation was likely to rise, but remain below the mid-point of the Reserve Bank of New Zealand's 1-percent to 3-percent target range.

The government had substantial fiscal space, but immediate fiscal stimulus would risk overheating the economy, it said.

"To the extent that the resources used in the Canterbury earthquake rebuild are freed up in the course of 2017 and beyond, the government should fund infrastructure and increase funding to meet the challenges posed by inequalities and exclusion," it said.

Finance Minister Bill English welcomed the report, saying it showed the New Zealand economy was continuing to outperform most others in the developed world.

"The OECD says the global economy has been stuck in a 'low growth trap', but forecasts growth in New Zealand of 3.5 percent this year and 3.4 percent next year before declining to 2.6 percent in 2018," English said in a statement.

The forecast had emphasized the importance of keeping government spending under control, reducing debt and getting better value for investments in public services and infrastructure, he said.

"We do not know what is around the economic corner," said English.

The report had also noted that the value of investment in new homes was forecast to rise from 4 percent of gross domestic product in 2011 to 7.8 percent by the end of this year. Endit