Second economic hit forecast

AUCKLAND: The economy is expected to slip back into recession early next year as delayed job losses, falling consumer spending and the absence of international tourists bite into growth.

Infometrics chief forecaster Gareth Kiernan said the economy had fared better than expected as it emerged from the first effects of Covid19, but faced a crunch early next year.

‘‘The loss of international visitors will be keenly felt by tourism operators during the normally busy summer months, while retailers will also be hoping that spending momentum continues into Christmas.

‘‘Other businesses are also likely to reassess their staffing requirements heading into the new year if there is any softness in demand conditions.’’

Infometrics was forecasting 186,000 fewer jobs by the middle of next year, along with reduced hours worked and weaker earnings growth, although it might not get that bad because of strongerthanexpected economic activity since restrictions were eased.

‘‘But if the unemployment rate does climb above 8% next year, Infometrics expects a contraction of more than 3% in both private consumption spending and GDP in the first nine months of 2021.’’

The economy was in a technical recession after contracting in the first half of the year.

However, it was expected to show a recovery in the three months ended September.

Infometrics expected the housing market toremain buoyant, driven by returning citizens and record low interest rates, although the growth in prices was expected to slow.

‘‘Renewed house price rises have been a side effect of the Reserve Bank’s efforts to stimulate the economy.

‘‘Job losses to date have been concentrated among segments of the population that are less likely to be homeowners.’’

The Reserve Bank was unlikely to reinstate restrictions on bank lending, even though the price surge was exacerbating the uneven effects of Covid19 and ‘‘amplifying inequality issues within New Zealand’’. — RNZ