Quake rebuild to boost growth
Rebuilding could boost growth to 4% late this year.
Tuesday, January 17 2012 || News || BY Marta Steeman, The Press
Earthquake rebuilding could boost that to 4 per cent by late this year. New Zealand growth of 3 per cent would beat UBS' global growth forecast of 2.7 per cent and its growth forecasts of 2 per cent for the United States.
UBS estimated that the Canterbury residential rebuild would begin by the end of the year and there would be demolition activity in the central business district for the rest of the year. However, constraints on capacity mean that the Canterbury rebuild could take between five and 10 years.
UBS expected the Reserve Bank to hold the official cash rate at 2.5 per cent until June and then start to raise it with the OCR at 3.25 per cent by year end.
Growth in the third quarter of 2011 had been a bit higher than expected and the fourth quarter - boosted by the Rugby World Cup spending - would make 2011 the best year since 2007.
But the economy remained patchy with fading consumer confidence alongside resilient business sentiment.
On the good news front, outside of Canterbury employment had been growing, up 2.8 per cent for the year.
This week important information would be the NZIER quarterly survey of business opinion and the consumer price index for the December 2011 quarter.
UBS was expecting business sentiment to deteriorate and headline inflation to drop to 2.6 per cent for the 2011 year.
BNZ said in its weekly report that global uncertainty would remain a drag on the New Zealand dollar rate against the US currency in the first half of this year.
European debt dramas would add to that. However, from the middle of the year BNZ expected to see a modest resurgence in the Kiwi dollar because of stabilising global growth, rising local interest rates and a more noticeable pick up in New Zealand growth.
While bouts of bad news and risk aversion would knock the Kiwi currency around at times, a fall in the currency should not be expected as long as New Zealand growth outpaced its trading partners and New Zealand commodity prices held up.
BNZ was forecasting the dollar would end the year at US82c.
