Economists forecast a longer and deeper recession

NBR: The New Zealand Institute of Economic Research’s latest survey of economists shows large downward revisions in the outlook for the economy.

Rob Hosking | Tuesday March 24 2009 - 12:00pm

The survey covers all bank economists in New Zealand, plus other economic forecasters, including the Reserve Bank and the Treasury.

The latest survey also predicts lower interest rates for longer and a lower dollar.

Both investment and private consumption are now expected to hit lows last seen in the 1991 recession.


Economists now expect, on average, a two more quarters of negative growth than they were in December – negative 0.8% for the December 2008 quarter (down from 0.0%) and -0.6% in the March 2009 quarter.

On an annual basis, forecast GDP growth for 2008/09 (March year) has dropped to -0.9% from -0.2% in the December survey.

Forecasters now expect average growth of -0.6% in 2009/10 (March year), recovering to 2.7% by 2010/11.

The big downward revisions are in the crucial area of trade: in the December survey these were expected to be flat in 2008/09 and to increase 1.3% in 2009/10.

Not any more. The consensus prediction now is for a fall by 3.1% in 2008/09 and a further fall of 2.5% in 2009/10.

Forecasters expect export growth to recover to 3.2% on average by 2010/11.

The Kiwi dollar is expected to depreciate further on a trade-weighted basis, and the TWI to average 60.5 (down from 61.9) in 2008/09 and to bottom at 51.9 (down from 56.2) in 2009/10.

Forecasters expect short-term interest rates (measured by 90-day bank bill yields) to drop significantly to 6.0% (down from 6.9%) in 2008/09 and 3.0% (down from and 4.8%) in 2009/10.