12 August 2009

New Zealand economy to emerge from recession

The Westpac Banking Corp has said New Zealand’s economy will emerge from the worst recession in three decades even with a currency around 70 US cents.

New Zealand economy

New Zealand's economy is expected to be lifted by new housing construction.

The construction industry rather than exports, which are being curbed by the high exchange rate, is expected to lead economic growth over the next year Sharon Zollner, an economist at Westpac in Wellington, told Bloomberg.

She expects the economy is growing in the current quarter, ending a recession that began in the first quarter of last year.

The 28 per cent gain of the New Zealand dollar against the US dollar over the past six months has reduced the value of meat, butter and wool sales in global markets.

Finance Minister Bill English and Reserve Bank Governor Alan Bollard have said the currency is making it hard to achieve an export-led recovery.

“If we have the New Zealand dollar at around 70 cents there’s no way we’re going to get an export-led recovery,” said Zollner.

Bollard on July 30 said he forecasts an economic recovery based on a lower currency and long-term interest rates. If the recovery is put at risk, the central bank may “reassess policy settings,” he said.

The demand for residential construction is being driven by rising numbers of those migrating to New Zealand and a shortage of houses built during the past two years as consumer confidence slumped and credit dried up.

New Zealand needs to build around 23,000 houses a year, and in the year to June there were 15,000 approvals granted, the Building Research Association said last week.

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