New Zealand's economy is growing at the fastest rate since National came into power, after a stronger-than-expected June quarter.

Statistics New Zealand said agriculture expanded by 4.7 per cent in the three months to June 30, helping Gross Domestic Product (GDP) to a rise of 0.6 per cent.

In the year to June 30 the economy expanded by 2 per cent, which was the fastest since March 2008 when GDP grew by 2.5 per cent.

Economists had expected growth of about 0.3 per cent in the three months to June 30, with BNZ warning last week that it was possible the June quarter would see a slight contraction.

The kiwi dollar rose on the news, climbing about US0.4c to trade at just under US83c just after 11am.

Dairy production was the main driver of the expansion, boosted by strong pasture growing conditions earlier in the year.

Construction was also strong, expanding by 3.3 per cent, driven by both civil infrastructure projects and residential housing.

"The good pasture conditions in the first half of the year continued to contribute to economic growth this quarter," Statistics New Zealand national accounts manager Rachael Milicich said.

"We are also now seeing evidence of a rebuild in Canterbury following the earthquakes."

Westpac chief economist Dominick Stephens said growth was stronger than expected, but fitted with the bank's belief that the economy would pick up at the Christchurch rebuild and recovery.

''These figures seem roughly in line with how the economy 'felt' over the relevant period.''

Stephens said the figures were also stronger than the Reserve Bank had forecast, which could lend support to increasing interest rates.

''However, the impact on the Reserve Bank's attitude will be modest. Most economists have long expected growth to accelerate as a consequence of the Christchurch rebuild, the Reserve Bank included,'' Stephens said.

''The real question is what happens to inflation following the stronger growth. So far, inflation has been remarkably low. It is also worth noting that these gross domestic product figures are now somewhat dated - the tone of data relating to the September quarter has been slower.''

Recent figures have suggested the economy may be weakening, and finance minister Bill English said the outlook for growth was ''modest''.

However he said households and businesses were focused on growth which was not based on consumption and debt, and the country was performing better than most international peers.

"New Zealand's economy continues to perform better than those of most other developed countries, despite uncertainties in Europe, the United States and suggestions that growth in China may come off its recent highs.''

- © Fairfax NZ News

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