WELLINGTON: New Zealand economy seems to be achieving high level as unemployment will continue falling from 6 percent in the year to March 2014 to 5.4 percent by next March and 4.5 per cent in March 2019.
Economic growth is expected to average a historically high annual rate of 2.8 percent over the next five years, although growth will peak in the year to March 2015 at a slightly lower level than was forecast in the budget in May, the government’s half year economic and fiscal update says.
New Zealand is performing pretty well in a world that remains uncertain as unemployment is forecast to continue falling from 6 per cent in the year to March 2014 to 5.4 per cent by next March and 4.5 per cent in March 2019. Labour force participation rates remain elevated compared to other developed economies at around 68.8 per cent, despite strong ongoing net inward migration that is seen peaking in the year to March 2015 at a net 52,400 new arrivals.
But it also means the annual average potential growth rate while keeping inflation stable has been raised to 2.4 per cent in the current financial year, peaking at 2.9 per cent in mid-2016, before falling back to 2.3 per cent by the end of the forecast period, in 2019.
The Treasury forecasts assume a considerably stronger New Zealand dollar than forecasts in the Reserve Bank of New Zealand’s monetary policy statement last week, with the trade-weighted index forecast at 76.6 in March 2017, compared with the RBNZ’s forecast of 73.6.
The balance of payments deficit is affected by the lower track for export receipts, rising from 2.7 per cent of gross domestic product in the March 2014 year to peak at 6.2 per cent in March 2016, before falling back to 5.9 per cent of GDP by March 2019. If, however, the terms of trade prove to be weaker for longer than forecast, the Treasury forecasts a scenario where the current account could blow out to close to 8 per cent of GDP over the next two years.
