CANBERRA - In projections hedged with uncertainties, Australia's key commodity analyst expects the New Zealand economy to regain momentum this year and to lead growth in most other OECD countries until 2004.
But with continued pessimism over global commodity markets, the Australian Bureau of Agricultural and Resource Economics' (ABARE)assumptions also carry an implied warning of a deepening balance of payments deficit for Wellington.
And there remains considerable concern that Japan may yet drag down what appears likely to be a modest recovery in the global economy, with significant structural reforms still urgently needed both there and in stricken Southeast Asian nations.
ABARE's assumptions for New Zealand growth of 1.7 per cent this year and 3 per cent for the following four years would place the country's performance behind only Australia's expected medium-term average of 3.5 per cent in the developed world.
OECD growth is expected to average 1.8 per cent this year, rising to 2.3 per cent by 2002-2004.
The key economies of Southeast Asia will climb slowly back from their 1998 trough, with negative growth this year creeping up to 1.1 per cent in 2000 and 5 per cent in 2004.
ABARE's forecasts fall against a background of a projected slump to 1.9 per cent in world economic growth this year, and continuing clouds over Asia.
"Asia is a major concern, with serious doubts about the effectiveness of recent attempts by Japan's Government to stimulate economic activity and to successfully resolve the bad debt problems in Japan's banking sector," ABARE's executive director, Dr Brian Fisher, told the annual Outlook conference in Canberra.
"The situation remains difficult elsewhere in East and Southeast Asia, especially in Indonesia and Malaysia."
The problems facing New Zealand and Australia have been compounded by an average 20-30 per cent fall in agricultural commodity prices last year.
With both countries heavily reliant on commodity exports, continued low prices will hit trade balances.
ABARE expects the value of Australia's commodity exports to fall 2.6 per cent in 1998-99 and by a further 4.2 per cent in 1999-2000 - although farm exports should recover slightly next year from a 1998-99 slide of 3.8 per cent.
Even so, the commodity price downturn is likely to add $A2.8 billion to the balance of payments deficit.
It forecasts that the Australian economy will slow from a 1998-99 average of 4 per cent to about 2.7 per cent in 1999-2000.
