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Economic and Fiscal Forecasts December 2008

Alternative Scenarios

To illustrate the uncertainty associated with the current economic outlook, two alternative forecasts are presented below. These forecasts differ from the main forecast track by assuming different rates of trading partner growth and illustrate the considerable range in fiscal outcomes that could occur.

Downside Scenario

The main forecast track incorporates a weak growth outlook for our trading partners. It is nevertheless prudent to consider the implications for the New Zealand economy if the slowdown in world growth were to be deeper and more prolonged than assumed in the main economic forecasts. While such a scenario does not represent our view of the most probable path for the New Zealand economy, given the size of downward revisions to the global outlook that have occurred over the past year, there still exists a reasonable probability of such a scenario occurring.

Table 11 - Key economic features of the downside scenario
(Annual average % change,
Year ending 31 March)
2008
Actual
2009
Forecast
2010
Forecast
2011
Forecast
2012
Forecast
2013
Forecast
Real GDP components:
Private consumption 3.3 -0.2 -0.2 -0.5 0.9 1.8
Residential investment 3.8 -22.0 -18.8 6.3 14.1 18.4
Market investment 7.4 5.2 -23.7 2.0 16.0 8.8
Gross national expenditure 4.5 -0.1 -4.1 1.0 4.2 4.0
Exports of goods and services 2.3 -1.0 -3.2 1.7 8.9 7.7
Imports of goods and services 9.7 3.0 -14.0 -2.7 7.3 6.9
GDP (production measure) 3.2 -0.2 -0.3 2.3 4.5 4.2
Unemployment rate1 3.7 5.0 7.2 7.1 5.9 4.8
90-day bank bill rate2 8.8 5.0 3.5 3.2 4.0 5.0
TWI2 71.9 53.4 48.7 51.7 52.8 52.6
CPI3 3.4 3.1 3.1 1.0 1.2 1.5
Current account balance (% GDP) -8.0 -9.7 -10.6 -5.6 -3.1 -3.5
Nominal GDP level (deviation from
main forecast, $billion)
0.0 -1.1 -6.9 -5.1 -4.5 -4.8

Sources: Statistics New Zealand, Reserve Bank of New Zealand, the Treasury

Notes:

  • 1 Percentage of labour force, March quarter, seasonally adjusted.
  • 2 Average for March quarter.
  • 3 Annual percentage change, March quarter.
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