Bounceback may be weaker, says OECD

GDP is predicted to lift to 3.9% in 2011, compared with 2.5% in 2010. Photo / Paul Estcourt

The "bounceback" of domestic demand in New Zealand's economy may be weaker than in past recoveries, the OECD says.

"The overhang of private sector indebtedness, 'sticky' unemployment and lingering uncertainty ... . may hold back investment," the Organisation for Economic Co-operation and Development said yesterday in an economic outlook for 87 countries.

The OECD said that globally, trade flows were again rising. "Strong growth in China and other emerging markets is helping to pull other countries out of recession, but at the same time, the risk of overheating and inflation is growing in emerging markets."

In New Zealand, it predicted a lift in gross domestic product (GDP) of 3.9 per cent in 2011, compared with 2.5 per cent in 2010.

Consumer price inflation is predicted to rise from 2.2 per cent this year to 2.5 per cent in 2011, with the "core" CPI (excluding food and energy) also rising 2.5 per cent in 2011, even though it will be only 1.8 per cent this year.

New Zealand's jobless rate is expected to drop to 5.6 per cent in 2011.

- NZPA