Friday June 23, 2006

New Zealand economy grows solidly in first quarter

WELLINGTON (AP) - New Zealand's economy grew 0.7 percent in the March quarter, sharply ahead of the 0.1 percent contraction in the three months ended Dec. 31, new figures showed Friday.

Growth in gross domestic product was in line with market predictions and means New Zealand avoided slipping into a technical recession, which occurs when two consecutive quarters record negative growth.

For the year to March, GDP grew 2.2 percent, down from 3.7 percent growth in the year to March 2005, Statistics New Zealand said.

The outcome was slightly stronger than predicted by the nation's central bank which had expected 0.5 percent growth for the three months ended March 31 and 2.1 percent for the year.

The pace of growth is unlikely to cause the Reserve Bank to review its hawkish stance on monetary policy as it battles inflation headwinds arising from higher oil prices and a weaker local currency.

New Zealand's annual inflation is currently running at 3.4 percent and remains above the bank's 1 percent to 3 percent tolerance range.

The March quarter GDP result flies in the face of those who predicted doom and gloom for the New Zealand economy, Finance Minister Michael Cullen said.

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