Inflation outlook ‘positive’

Press, 11 September 1989, Page 2

Inflation outlook ‘positive’

By

PATTRICK SMELLIE

in Wellington

An expected 3 per cent wage round means that the inflation outlook is still good, according to the latest quarterly forecast from Berl (Business and Economic Research, Ltd).

Berl forecasts a 6.5 per cent annual inflation rate for the year ended September, but adds that the outlook remained positive given the low four percent wage round in 198889, and the lower 3 per cent round forecast for 1989-90.

Also reducing pressure on prices would be stable export prices for meat, dairy and forest products, the reversal of other commodity prices and the continuing roll-back of import protection.

Berl forecasts that annual consumer price index inflation will be down to 3.4 per cent by June, 1991.

The extra 2.5 per cent GST and retail and producer price rises had led to the 6.5 per cent forecast for the September, 1989, year. Berl forecasts that after a sharp recession in late 1988, the economy was in a period of consolidation which should, last at least another nine months.

Government moves on the stock tender programme had lowered long term interest rates and signalled a new emphasis

on economic growth, triggering a wave of business confidence.

The recovery this year is projected by Berl to move into a “growth mode” mid next year. But although job losses had slowed since they peaked late last year, Berl did not foresee an increase in the level of employment until the end of 1990.

Significant job losses were still to come in the social services, local government, and were expected in retailing. Overall, Berl forecast job losses of 45,000 to 55,000 this year, up to 10,000 in 1990, but employment growth in 1991. The number of people registered unemployed or on special schemes is expected by Berl to rise, from the present figure of 175,000 and 180,000, to 200,000 by March next year, to peak at 220,000 next winter. Berl said that its forecasts for next year had been revised upwards after the Government’s decision to increase the accent on growth and initiate a decline in interest rates.