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Source: ONE News
Economic think tank the New Zealand Institute of Economic Research says economic growth prospects are up for the first time in over a year.
The NZIER's latest quarterly survey shows the recession is starting to ease with forecasters expecting quarterly gross domestic product to contract by 0.2% in June and to resume growing in September by 0.1%.
New Zealand's gross domestic product fell by 1.0% in the first three months of this year.
Economic growth is also expected to average 1.3% over the year to March 2010 compared with -1.6% in the last survey in June, and expectations for the recovery are consistently optimistic.
However, the NZIER says while most expectations are improving, there is uncertainty over the strength and speed of an economic recovery
Still some way down for consumers
The outlook for the labour market is expected to worsen, with employment tipped to decline by 1.8% over the year to March 2010. However, this is better than the 2.7% decline predicted in the earlier survey.
Expectations for the unemployment rate, which currently sits at 6%, are relatively unchanged with forecasts expecting 7.1% in March 2010 and 7.3% in March 2011.
With job losses potentially in the pipeline, the NZIER says household spending is expected to contract by 0.6% over the next year. However, this is slightly more optimistic than the 0.7% decline predicted in the last survey.
The NZIER says investment in the sector will contract further over the coming months to March 2010.
Beyond this, many forecasters expect it to grow over the year to March.
Export outlook brightens
The NZIER says expectations for exports have significantly improved, though they remain in contraction.
Exports are now forecast to contract by 1.1% in March 2010 - a significant upwards revision from -4.1% in the last survey.
However, the think tank warns that while the export sector has shown resilience, its outlook is tempered by uncertainties over the increasing strength of the Kiwi dollar.
The Kiwi dollar has risen more then 40% since March and is now hovering between 70-71 US cents.
Inflation and interest rates
Survey results show inflation is predicted to rise from 1.6% to 1.9% in March 2010, though this remains within the Reserve Bank's target band of 1-3%.
A more rapid rise in long-term interest rates is predicted as signs of recovery take hold and public sector debt accumulates.
Long-term interest rates for the year to March 2010 and March 2011 are now 5.8% and 6.1% respectively compared with the 5.4% and 5.8% previously forecasat.
