UPFRONT Dropping dollar softens landing

Recovering exports will help soften the landing for New Zealand’s economy which is now predicted to slow to 1.4 percent during the coming year before rebounding to 2.4 percent in the 2007/2008 year.
NZIER Consensus Forecasts released last month suggest the recent pattern of strong internal growth offsetting tight export market will reverse as the slump in export growth bottoms out this month to recover strongly over the next two years.
The dollar is already dropping at faster-than-expected pace and householders may get some relief as inflationary pressure is expected to ease and interest rates start heading south again. The outlook for 90-day bank bill rates is expected to fall to 6.9 percent over this year and further three or four percentage points the following year.
An historically tight labour market is expected to ease but pressure on wages will remain with forecasters anticipating 4.1 percent growth in private sector wages out to 2007.

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