April 3, 2001
Media statement on quarterly prospects
ECONOMY PRIMED FOR GROWTH
Statement made by Rozanna Wozniak, Senior Economist, ASB Bank
The ASB Bank sees the New Zealand economy as being in a robust condition. In addition to being well positioned to weather potential global downturns this year, it is primed for a strong rebound in 2002.
In its latest Quarterly Prospects report, the ASB Bank says the economy has built up momentum and is still to benefit from the full impact of higher export incomes.
Because New Zealand is unlikely to escape the global downturn, a prudent approach would be to plan for average economic growth this year.
However, if the global economy starts to regather momentum in the second half of this year, and New Zealand has withstood the downturn as well as expected, the economy should be set up for a much stronger 2002.
The Bank is forecasting gross domestic product to grow by 2.5% for the year ending March 2001, followed by growth of 2.8% next year and 3.2% in 2002/03.
The sector enjoying the strongest prospects at present is the dairy sector. It can be described as “very confident”.
In February, dairy farmers received the first of what will amount to $1.2 billion in top-up payments that will be paid to this sector between February and August.
Initially, our customers used around half of this money towards debt repayment and the remainder to increase deposit balances. Farmers are now in a position where they can pay off debt and increase spending at the same time. Also noticeable is strong interest in taking on new debt come the June farm sale season.
The housing sector can also expect to benefit from current economic conditions. The market has recovered from last year’s slump and has now stabilised.
The Bank’s report forecasts inflation to decline to 1.6% for the year ending March 2002 and 2% the following year, with unemployment remaining under 6% through to the year 2003.
Given current global and New Zealand uncertainties, short term interest rates have the potential to go lower during this year. However, a rebound in the economy next year would also bring with it a turnaround in this downward interest rate trend.
While New Zealand faces its difficulties during the coming year, 2002 should be abound with opportunities.
For more information, contact:
Rozanna Wozniak, ASB Bank Senior Economist, Ph. (09) 374 8562 or
Released for ASB Bank by Network Communications (Clare England),
ph. (09) 379 3154