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NZ sees economy recovering slowly

NEW Zealand's economy is on track to begin growing before the year's end but the recovery from recession is likely to be slow, the nation's central bank chief said yesterday.

The slump is near its low point with economic stimulus bolstering the domestic economy, and the global economy appearing more stable as growth forecasts for major nations stop falling, Reserve Bank Governor Alan Bollard said.

"The recovery is likely to be slow and drawn out. It could also be erratic," he told a business audience in the capital, Wellington. "To many households it may not feel like a recovery at all."

"This shock has been so big the nature of the recovery is hugely uncertain," Bollard said, with future growth rates in developed economies likely to be lower, "but just how much is unclear."

New Zealand's economy has been in recession for the past 18 months with its jobless rate of 5 percent in the year ended March 31 the highest level in six years, according to the nation's Treasury Department.

Jobless rate rising

New Zealand recently forecast that unemployment could reach 8 percent - or more than 200,000 people out of work - in 2010. The department projects gross domestic product to contract 2.7 percent in the year ending March 31, 2010.

A "severe" domestic swine flu outbreak, already hitting businesses, "would delay recovery," he said.

The governor was also "disappointed" that the country's commercial banks had not fully passed on cuts in key interest rates into their short-term lending rates.

"Overall, we think the broader tightening in financial conditions seen over recent months risks undermining the recovery before it becomes self-sustaining," he said.



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