NZ Economy on Path to Positive Growth Despite Iran Conflict

Westpac's chief economist Kelly Eckhold says New Zealand's economy is improving and expects growth to reach 2 percent this year, up from flat in the June quarter. The economy had weathered the disruption caused by the Iran war relatively well, he said.

The main drivers of growth are exports, with strong commodity prices, a good tourism season, and solid trading partner growth lifting incomes and spending in rural and tourism-exposed areas of the South Island.

Eckhold also expects low short-term interest rates to help construction and household demand. However, inflation remains high at 4.1 percent due to the 20 percent jump in petrol prices caused by the conflict.

Core inflation has been above the Reserve Bank's target band for five years, but Eckhold believes it will eventually come back down to target.

Eckhold expects the official cash rate (OCR) to increase to 4 percent through next year to help bring inflation back under control. He also predicts the unemployment rate will remain steady at around 5.4 percent before dropping to 4.9 percent.