Economic growth was likely to hold up at solid levels in coming years, the latest New Zealand Institute of Economic Research Consensus Forecasts show.
NZIER senior economist Christina Leung said yesterday the economy performed strongly during 2014, boosted by improving household consumption and investment.
Forecasters expected growth of 3.3% in the March 2015 year, tapering slightly to 2.9% and 2.8% in the following two years.
Strong residential construction activity had been a key contributor of GDP growth, driven by house-building demand in Canterbury and Auckland.
As the rebuild in Canterbury neared completion, there would be some moderation in residential construction growth, she said.
The sharp fall in petrol prices would be a key driver of low inflation over the 2015 calendar year.
Beyond that, inflation was expected to lift as capacity pressures emerged.
''That is a story for 2017 and Consensus Forecasts show a gradual lift in the OCR over 2017 and 2018,'' Ms Leung said.
The Forecasts
Economic growth: Forecasts expect 0.8% quarterly GDP growth in the December 2014 quarter when the data is released on Thursday.
Household spending: Improved household incomes and strong net migration are providing a boost to household spending. Although spending will remain solid, the rate of growth will moderate, reflecting some degree of household caution.
Residential construction: Residential construction activity levels will remain high but the rate of growth will moderate. The Canterbury housing rebuild is nearing completion but strong house-building demand in Auckland will be a key support of residential construction activity.
Exports: Will be flat in the year to March 2015, largely reflecting the effects of slowing global demand. Beyond that, exports will lift as the New Zealand dollar falls and global demand improves.
Exchange rate: The New Zealand dollar will remain high in 2015, before gradually easing in the following years. The level is expected to remain high compared with historical levels, badly affecting export competitiveness.
Inflation: Consumer price inflation is expected to drop to an annual rate of 0.5% in the March 2015 year and remain below the Reserve Bank's 1% to 3% target for much of this year. Domestic cost inflation will lift as capacity pressures emerge in 2016 and 2017. Inflation is expected to rise to the middle of the Reserve Bank's inflation target range by 2017.
Interest rates: Forecasters expect the 90-day bank bill rate to lift gradually. The low inflation environment indicates little to warrant interest rate increases from the Reserve Bank in the next year or so. A gradual lift in the official cash rate is expected during 2017 and 2018.
Labour market: There is a wide divergence in views about the labour market. Most forecasters expect continued employment growth to further push down the unemployment rate. However, some expect a sharp lift in the unemployment rate due to strong migration expanding the labour force. The consensus points to a modest lift in wage growth as employment demand continues to improve.
