New Zealand's economic growth is set to slow over the next five years as it becomes more sustainable, according to a forecast from the independent New Zealand Institute of Economic Research (NZIER) Wednesday.
"Economic growth will average 2.5 percent in the next five years, after a strong 3.4 percent in 2014. One-off boosts are fading, but there is a durable underlying recovery taking place that is not built on fickle borrowing," NZIER principal economist Shamubeel Eaqub said in a statement on the release of the institutes Quarterly Predictions report.
"The New Zealand economy has grown strongly recently, made up of two parts: a gradual but sustainable underlying recovery and one-off boosts," said Eaqub.
"The core recovery has been moderate, but strong enough to generate jobs and income growth. Household and business behavior is slowly returning to normal. This part of the recovery is durable as it is largely funded out of income, rather than borrowing."
The fading "one-offs boosts" included the rebuild of the earthquake-battered Canterbury region, which was expected to peak early next year, and the rebound from the last southern summer's drought, which had past as dairy prices halved over the last nine months.
The two key risks to the economic outlook were slowing global growth and the overvalued housing market in the biggest city of Auckland.
"Weaker global growth will weigh on commodity prices, exports and the provincial economy. Any bursting of the Auckland housing bubble will dent consumer confidence and banks' willingness to lend," he said.
With little inflation in New Zealand or globally and few signs of inflationary pressures, the NZIER saw no catalysts for the Reserve Bank of New Zealand to raise interest rates until 2016./.