Forecasters expect weaker economic activity over the next two years than they did three months ago.

The consensus in a three-monthly survey of 10 forecasting organisations done by the NZ Institute of Economic Research is for the economy to grow 2.1 per cent over the year to next March, down from 2.7 per cent in the March survey, then pick up to 3.1 per cent, previously 3.2 per cent, the next year.

Growth in the March 2012 year, due to be reported on Thursday, is expected to be just 1.2 per cent. In the previous survey the consensus was 1.8 per cent.

The consensus forecasts for GDP growth are very similar to the Reserve Bank's last week, just 1 percentage point higher for each of the three years.


"Global demand is anaemic and the European debt crisis is going from bad to worse," NZIER economist Kirdan Lees said. "This is creating uncertainty that delays firms' investment plans.

"A weak demand environment means businesses cannot raise prices much, so inflation is low.

"As a result the Reserve Bank is likely to delay raising interest rates."

Forecasts for growth in private consumption, about 60 per cent of total demand in the economy, in the year to next March have been cut from 2.4 to 1.9 per cent as households spend less and whittle down debt.

The rebuilding in Canterbury is expected to see residential investment jump 22 per cent in the year ahead and a further 27 per cent the year after.

But Lees said there was a wide range of forecasts for residential construction, reflecting uncertainties on the extent and timing of the rebuilding.

Interest rates are expected to be lower for longer. "This is because there is anaemic growth and weak demand, and inflation is subdued."

Inflation is expected to average 2.1 per cent over the next three years, unchanged from the previous survey.

Forecasts for both exports and imports have been revised down, the former more than the latter, while the dollar remains high on a trade-weighted basis.

Meanwhile, Bank of New Zealand economist Craig Ebert said the latest global economic forecasts from Consensus Economics, published late last week, held up remarkably well overall.

The consensus for growth in calendar 2012 was maintained at 2.6 per cent, and for 2013 shaved just a decimal point, to 3 per cent, Ebert said.

While much of the eurozone was in recession, growth in both Australia and Japan had accelerated to an annualised pace of 4 per cent over the past six months or so.

"And while China's GDP growth has slowed," Ebert said, "the consensus is forecasting a soft landing, not a hard one."