Slow rural growth tipped

ANDREA FOX
Last updated 16:14 19/11/2012

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Waikato farmers and rural industry stakeholders are likely to be shy about opening their wallets for some time yet judging by the economic prognosis from a visiting senior bank economist.

The BNZ's Doug Steel told a KPMG rural update seminar in Hamilton that with New Zealand posting recent growth rates of 2-2.5 per cent and the annual growth outlook for the next few years around 2-3 per cent,  its economy is a good deal healthier than many.

But agriculture will probably be on the lower end of the growth activity to come because of the continuing strength of the Kiwi dollar, he said.

Interest rates were expected to tick higher late next year or early 2014 and with the US and China economies tipped to show some growth, international commodity prices should increase a little, and were already showing slight improvement.

But in recent weeks there had been warnings the New Zealand economy was going into a ''soft patch'' and next month's  GDP figures could show it went backwards in the third quarter, Steel said.

The BNZ believed some of the recent negative data like the surprise rise in unemployment was ''a pothole'' on the road to a generally slowly improving economic performance, but the road was ''getting seriously tested''.

The chances of the Reserve Bank lowering the official cash rate (OCR) were getting less by the day because of the possibly inflationary effect of the Christchurch rebuild and house buyers ''getting a bit too excited'' in markets  like Auckland.

At $20 billion to $30 billion, the size of the Christchurch rebuild economic activity was ''enormous'', two to three times the value of New Zealand's annual dairy exports. Also, the Reserve Bank would be eyeing a $2 billion lift in already high agriculture debt in the last two to three months, he said.

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- © Fairfax NZ News

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