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Quake reconstruction kick-starting New Zealand economy: survey


13:11, July 09, 2013

WELLINGTON, July 9 (Xinhua) -- An independent survey of New Zealand business opinion in the quarter to the end of June points to an annual economic growth rate of 2 percent, leading analysts to forecast interest rates would remain at their historical low till early next year.

The Quarterly Survey of Business Opinion from the New Zealand Institute of Economic Research (NZIER) found businesses were optimistic, despite domestic trading activity growth declining from 10 percent in the March quarter to 4 percent.

"Businesses are hiring and investing more, a sign of continued momentum in the economic recovery. The recovery is still at an early stage, with few generalized shortages of labor or capacity. Price pressures remain low," NZIER chief executive Jean-Pierre de Raad said in a statement Tuesday.

Activity was growing strongly for manufacturing and building, largely driven by the rebuild of the earthquake-battered Canterbury region, while services sales were growing gradually, and financial services sales and retail sales had slowed.

Costs and prices ticked up in the June quarter, but remained at historically modest levels.

The survey found 30 percent of respondents expected interest rates to rise over the next year, up from minus 9 percent in the March quarter.

An Economic Update from the ASB Bank said the survey showed "a stark contrast is emerging between Canterbury and the rest of the country," with Canterbury expanding rapidly, and capacity and cost pressures starting to emerge.

"Before long, it is likely that Canterbury will start to soak up more of the spare capacity in the national economy, which may generate more widespread domestic inflation pressures. We continue to expect the OCR (official cash rate) to remain on hold until March 2014," it said.

The Reserve Bank of New Zealand has held the OCR at the historic low of 2.5 percent since March 2011.

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