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New Zealand economy buffer against global uncertainties: forecast

Xinhua, November 30, 2016 Adjust font size:

The New Zealand economy is in good enough shape to withstand recent earthquakes and changes in the global political situation, an independent think-tank said Wednesday.

Recent events had introduced more than the usual uncertainty into the economic outlook, according to the Quarterly Predictions report from the New Zealand Institute of Economic Research (NZIER).

It said this month's 7.8-magnitude quake, which killed two people in the northeast of the South Island, had disrupted business activity and caused substantial damage to infrastructure and buildings.

However, the effects were expected to be largely isolated to the regions that bore the brunt of the earthquakes, said a statement from NZIER senior economist Christina Leung.

"Offshore, the shock election of (Donald) Trump as President of the United States ups the ante on global relations," Leung said.

"There is much uncertainty over which of the many policies he flagged prior to the election he will follow through on, but markets for now have taken his surprise win in their stride."

The New Zealand economy was in good shape, which should provide a buffer against these shocks.

"Besides tourism, construction activity continues to ramp up as housing supply increases in response to strong demand. The continued surge in net migration will underpin housing demand over the next few years," said Leung.

Annual gross domestic product growth was expected to average over 3 percent over the next five years.

The risk of deflation had subsided, with inflation expectations lifting globally and commodity prices recovering.

Although annual consumer price index inflation in New Zealand remains well below the Reserve Bank of New Zealand's 1-percent to 3-percent target band, it showed signs of lifting.

The NZIER did not expect the Reserve Bank to cut the official cash rate further than the current historic low of 1.75 percent in the near future.

The report contrasted with an economic forecast from the OECD (Organization for Economic Co-operation and Development) out Tuesday.

It forecast growth in New Zealand of 3.5 percent this year and 3.4 percent next year before declining to 2.6 percent in 2018. Endit