Experts lower forecast for economic growth: survey

Exports are predicted to grow at about 3 per cent a year for the next four years in volume terms. Photo / Brett Phibbs

Economists have cut their forecasts of economic growth in the current year, the latest quarterly survey conducted by the New Zealand Institute of Economic Research has found.

The consensus among the nine forecasters NZIER polled is that the cycle has peaked and that annual average growth will come in at 3.3 per cent for the year ended March 2015, down from a consensus forecast of 3.8 per cent three months ago.

Expectations for the two following years have been revised up, but only slightly, to 2.9 per cent for the year to March 2016 from 2.8 per cent in June and to 2.2 per cent the year after from 2.1 per cent.

Forecasters now expect Statistics New Zealand to report on Thursday that gross domestic product grew 0.6 per cent in the June quarter just past, rather than the 0.9 per cent they were picking in the survey three months ago.

The pace of growth in residential construction is expected to moderate from 15 per cent this year to zero in three years' time.

Exports are forecast to grow at about 3 per cent a year for the next four years in volume terms, supported by a fall in the exchange rate which makes exporters more competitive. But the forecast depreciation, 9 per cent by March 2018 in trade-weighted terms, would still leave it high by historical standards.

Interest rates are expected to start rising again from early next year, gradually through to 2018, the average forecast being by 1.3 percentage points. That would raise floating mortgage rates from about 6.75 per cent to 8 per cent.

But wages are expected to grow 3.3 per cent a year over the next three years, outpacing the cost of living by 1.3 per cent a year, similar to the historical average pace of real wage growth.

The unemployment rate is forecast to ease from 5.6 per cent now to 5 per cent by 2017.