Study Says New Zealand Economy Is Stagnant

29 May 2012 14:00 - Florence Fullalove

Study Says New Zealand Economy Is Stagnant

According to a study from the New Zealand Institute of Economic Research (NZIER), New Zealand’s economy is stagnant and looks set to struggle over the next two years because of delays to the Canterbury earthquake rebuild, reluctant consumers, slowing growth in major trading partners, and sluggish investment.

In its Quarterly Predictions report, NZIER said the country is going through a period of playing down debt, and that along with a weak labour market, anaemic wage growth and consumer demand would all combine to limit growth to around 1.5% in 2012.

 NZIER’s Principal Economist Shamubeel Eaqub said, “There is little economic growth and the outlook is challenging,” and added, “Low interest rates are not encouraging new borrowing and investing, as we pay down debt or deleverage.” Eaqub said the Reserve Bank may cut interest rates if the European debt crisis worsens.

The institute predicted growth would to pick up to 2.5% in 2013, little changed from its first quarter forecasts, and 2.4% the year after.