Wellington -New Zealand is out of recession, but "the next few quarters will be bumpy as the economy slowly converts the rebound into recovery," an influential think tank reported on Tuesday. "There are still significant risks to the economy from renewed over-valuation in the housing market, rising unemployment, persistent external imbalances, rising oil prices and eventual withdrawal of monetary and fiscal stimulus," the New Zealand Institute of Economic Research said in its latest quarterly predictions.
Principal economist Shamubeel Eaqub said the economywas estimated to have contracted by 0.9 per cent this year and should be followed by a "subdued" 2.6 per cent recovery in 2010.
He warned, however, that the unemployment rate may rise from the current 6.5 per cent to 8 per cent by the middle of next year.
The report predicted a full-fledged recovery in consumer spending would take place in late 2010, when the labour market improved, "due to pent up demand for big ticket items."
Eaqub said the Reserve Bank of New Zealand was expected to start raising its benchmark official cash rate (OCR) from the current 2.5 per cent from the September quarter next year to 5.5 per cent by mid-2011.
