New Zealand growth to quicken in H2 - Treasury

WELLINGTON, Nov 2 - The pace of economic recovery in New Zealand has quickened as domestic activity picks up after the longest recession in more than 30 years, the Treasury Department said on Monday.

It said a string of positive data, including higher house sales, retail sales, migration gains and building consents, all pointed to stronger demand and consumption.

"The Treasury is expecting the economy to grow at an annual rate of around 2 percent over the second half of 2009," the department said in its monthly commentary on economic indicators.

However, it said many of the growth drivers were weak and that the recovery might not be as strong as indicators suggested.

New Zealand posted growth of 0.1 percent in the three months to June 30 after five consecutive quarters of contraction.

The economy shrank 1.8 percent in the year to June 30.

The Treasury said the global growth outlook also looked better, with the latest forecasts of growth in New Zealand's main trading partners rising to around 3 percent for 2010 from the previous 1 percent forecast.

However, it said the strength of the NZ dollar, which has gained around 45 percent since a six-year low touched in March, was undermining the extent to which exports would boost recovery.

Last week, the Reserve Bank of New Zealand held its benchmark interest rate steady at a record low 2.5 percent for a fourth straight review, saying it expected to hold it there until the second half of 2010.

It noted the improving economy, but said inflation remained under control and there was no urgency to raise rates. <NZINTR=ECI>

The decision quashed financial market expectations for a start to the tightening cycle as early as January, although a 25 basis point rise is still priced in for March. <NZDOIS>

In the latest Reuters poll, all 14 economists expect the bank to remain on hold at its next policy review on Dec. 10.

The Treasury will produce updated half-year economic and fiscal forecasts in mid-December.