New Zealand's recession is expected to have deepened in the third quarter, with the economy contracting at its fastest pace in eight years, as the global turmoil exacerbated the local slump, a Reuters poll shows. The third quarter growth data is seen backing the case for further interest rate cuts and higher government spending.
The economy has been in recession since the start of the year but analysts said the central bank would pay more attention to the global environment than historical local data. "The big judgements will be about what's happening in the G7 and emerging economies and whether what we've seen for the past three quarters locally is just the tip of the iceberg," said Deutsche Bank chief economist Darren Gibbs.
A Reuters poll of 12 economists forecast that New Zealand gross domestic product fell 0.5 percent in the September quarter after dropping 0.3 percent and 0.2 percent in the first two quarters. Tight credit conditions and high costs dented domestic spending and a drought hit agricultural output, analysts said.
The forecast decline in activity would be the biggest quarterly decline in eight years. New Zealand was last in recession in 1997-98 following the Asian financial crisis and a drought. The central bank has forecast third-quarter activity shrank 0.3 percent.