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Economists in line with Bollard on Q3 GDP growth

NZ economists in accord with Bollard as GDP picks up pace in third quarter

By Jonathan Underhill

Dec. 21 (BusinessWire) – New Zealand’s economy probably accelerated out of recession in the third quarter, underpinning Reserve Bank Governor Alan Bollard’s decision to flag an earlier timetable for interest rate increases.

Gross domestic product grew 0.3% in the three months ended Sept. 30, based on a Reuters survey. Bloomberg has the median at 0.4%, the same as Bollard’s estimate.

“We are yet to see evidence of a widespread recovery,” said Nick Tuffley, chief economist at ASB.”Pockets of strength, particularly the housing market, have been offset by continued weakness in other sectors” such as construction, he said.

Still, “once the recovery becomes more widespread and self sustaining over 2010, the RBNZ can look to begin reducing monetary policy support, he said in a Dec. 17 report.

Supports are returning for the New Zealand economy, with the kiwi dollar having subsided from its 15-month high of almost 76 U.S. cents in late October to under 72 cents this week.

Net long-term migrants flowed into New Zealand at the fastest pace in five years in the 12 months ended in November, according to government figures yesterday. Migrants’ demand for housing helped stoke the last property boom. The 20,000 that ‘arrived’ in the latest year were mainly kiwis deciding to stay at home.

Dairy farmers will be paid $6.05 per kilogram of milk solids in 2010, Fonterra Cooperative Group confirmed last month. Prices have leaped forward in Fonterra’s monthly online milk powder auctions, whose price is to form the benchmark for the NZX Ltd.’s futures contract next year.

Credit card billings rose 1.6% last month from a year earlier, according to central bank figures yesterday.

March quarter average unemployment will peak at 6.6% in 2010, retreating to 6.3% in 2011, according to the December Monetary Policy Statement.

Still, signs are mixed. New Zealand’s total building work fell 6% in the third quarter, the seventh straight three-month period to show a decline, according to Statistics New Zealand.

The detail of the GDP data will be “extremely noisy,” said Bank of New Zealand economist Craig Ebert. It will be hard to tell whether growth of around 0.3% marks the start of a robust economic recovery, he said in a preview of the figures yesterday.

The government statistician is due to release the report at 10:45 am on Dec. 23.

Westpac Banking Corp. chief economist Brendan O’Donovan predicts third-quarter GDP growth of just 0.2% - “largely flat.”

“Lest we forget, the economy was still sporting deep scars of the recession in Q3,” he said. “In economist tongue, the output gap was at its most negative in Q3.”


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