The Claytons recovery – the recovery you have when you're not having a recovery – looks set to continue.The New Zealand Institute of Economic Research's latest consensus forecasts show economists on average expect 2.1% growth next year (down f
The Claytons recovery – the recovery you have when you’re not having a recovery – looks set to continue.
The New Zealand Institute of Economic Research’s latest consensus forecasts show economists on average expect 2.1% growth next year (down from 2.8% in the last survey) with 3.5% in 2012 (up from 3.1%) and then a drop back to 2.6%.
Technically New Zealand has been out of recession for five quarters but many parts of the economy are still showing nil or negative growth.
Today’s retail sales figures, out at 11am, are forecast to show a drop in core sales of 0.6%.
Next week’s GDP figures – for the September quarter – are expected to show overall growth of 0.6%, with the next quarter showing 0.5%.
The GST rise is expected to see price inflation spike but if this is taken out of the consumers price index (CPI) price inflation is forecast to be 1.6% and 2.3% over the next two years.
Unemployment is forecast to drop from its current level but to remain above 5% –dropping slightly to 6.2% next year and to 5.1% after that.
This is perhaps one reason why forecasters do not expect to see the GST rise result in higher wage demands.
“Wage negotiations are expected to ignore GST increases with wage earners fully compensated by personal tax cuts. Only gradual increases in real wages are forecast. Nominal wages are expected to grow 1.8% in March 2011 (from 1.5%), recover in 2012 (unchanged at 2.9%) and accelerate in 2013 (unchanged at 3.3%).
“Over the next two years general wage inflation, excluding the one-off increases will erode about 80%-90% of wage increases.”
Crucially, non-residential investment – which includes but is not confined to business investment – is only forecast to grow slowly.
This is a major contrast with the growth path out of previous recessions: there is usually a burst of investment activity as firms recover and make up for lost investment during the downturn. A surge in investment of 20% has been experienced in the past. Not this time.
The average of the forecasts for investment in this area is a rise of 5.3% the current year, rising to 8.6% next year and falling back to 6.4% the year after that.
Even this slow growth path is higher than it was, due to the Canterbury earthquake.
Overall, the forecasts confirm the outlook: technically, the recession is over, but for many New Zealanders it does not feel that way.
