NZ economic forecast upbeat despite Kaikōura earthquake

Auckland CBD (File)
Auckland CBD (File)

A new report has predicted economic growth will remain strong in New Zealand, despite the recent earthquakes and growing international uncertainty.

The New Zealand Institute of Economic Research (NZIER) believes the economy will grow at over 3 percent per year, for the next five years.

However it cautions: "Recent events have introduced more than the usual uncertainty into the economic outlook."

Its Quarterly Predictions report says the earthquakes that were centred around Kaikōura have had an economic impact across the country. The quakes disrupted business activity and causing substantial damage to infrastructure and buildings, especially in Wellington.

But the Institute (NZIER) says it expects the effects will be largely isolated to the regions which bore the brunt of the earthquakes.

The Institute says Donald Trump's election victory "ups the ante on global relations".

"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 NZIER says the New Zealand economy will helped by several factors, including tourism, construction and immigration.

The report also predicts that the Reserve Bank (RBNZ) is unlikely to lower the Official Cash Rate from its current level of 1.75 percent. That is despite the inflation rate being well below the RBNZ's target range of 1-3 percent.

The NZIER says there are signs that inflation is starting to lift, with construction costs continuing to show strong growth.


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