Think tank sees pickup next year

The bottom of the recession may have been reached and consumer spending should start picking up next year, according to an economic think tank.

The "green shoots" of global economic recovery are not convincing, so a muted recovery in exports is likely, but more migrants should see a modest overall recovery ahead, Berl says.

Berl's latest economic forecast is much less pessimistic about domestic consumer spending than Treasury and Reserve Bank predictions, which favour an export-led recovery.

Total consumer spending may be barely negative, down just 0.1 per cent in the March 2010 year, Berl's report says, as the worst of recession passes. Berl has a much less gloomy prediction for consumer spending than the Reserve Bank's expectation that consumption will slip 1.3 per cent. The following year spending growth should head back towards 2 per cent, Berl says.

Job numbers are expected to grow slightly in the year to March 2010, in part driven by rising net migration. But the net gain in jobs will be tiny, just 2500, showing a stalled job market.

That reflects a "boom and bust" in Auckland and "steady as she goes elsewhere", Berl says. People are being laid off in big numbers in Auckland, with job numbers there down 30,000 in the year to March, while jobs grew by more than 47,000 in the rest of the country.

But migration will be a positive for the economy, with a net inflow of 15,000 for the year to September expected this year. Net gains are expected to top 24,000 for the following two years.

Jobs are also likely to hold up due to ongoing regional infrastructure projects, Berl's latest forecasts show.

But Berl is not convinced the "green shoots" signal a global recovery soon, especially with the kiwi at just under US65c. Instead, a return to normal around the world will take some time, with New Zealand export volumes expected to fall more than 5 per cent in the year to March 2010.