Muted optimism on economy — survey

Press, 30 November 1989, Page 2

Muted optimism on economy — survey

Wellington reporter Muted economic optimism showed up for the second time this week with the release yesterday of the Reserve Bank’s December quarter Survey of Expectations. The survey of 179 companies and individuals pushed expectations of a return to growth out another three months and showed fears of a considerable worsening of the balance-of-pay-ments deficit. The survey was taken just before the announcement of a $1 billion downward revision in the balance-of-payments deficit on current account. However, business people believed interest rates would decline slowly, starting some time next year, and that the Government would do better than the Budget predicted in reducing the Budget deficit. Similarly to the National Bank survey, the Reserve Bank’s respondents expected inflation to rise a little faster now than they had in the past. “The Consumers! Price Index is expected to rise 1.5 per cent in the December, 1989, quarter, and 1.3 per

cent in the March, 1990, quarter, taking expected annual inflation to 7.5 per cent and 7.7 per cent respectively. “Average increases of 1.3 per cent in each of the June and September, 1990, quarters are implied,” it said. On economic growth, the survey found that the 0.4 per cent growth expected in the three months to the end of September had been pushed back to no growth expected. An estimate of 0.4 per cent was now given for the last three months of this year. “The degree of optimism shown in the September survey seems to have receded slightly in the short run, but a growth rate of 1.3 per cent is still expected for real Gross Domestic Product over the next year,” the bank said. Balance-of-payments opinions showed "a much worse outlook,” it said, particularly since they were based on more favourable information which had since been revised. Average wage rises of 5 per cent were picked by the survey, with registered unemployed remaining above 150,000 in the year to September, 1990.