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2005 OECD Economic Outlook, Volume 2005 Issue 2

image of OECD Economic Outlook, Volume 2005 Issue 2
Twice a year, the OECD Economic Outlook analyses the major trends and examines the economic policies required to foster high and sustainable growth in member countries. Developments in major non-OECD economies are also evaluated. The present issue covers the outlook to end-2007. Together with a wide range of cross-country statistics, the Outlook provides a unique tool to keep abreast of world economic developments.  In addition to the themes featured regularly, this issue contains an analytical chapter addressing the recent run-up in house prices.

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New Zealand

Activity is projected to slow and capacity constraints to ease, but some imbalances will persist. While rapidly expanding household incomes are likely to temper the effects of higher interest rates on consumer spending, rising wages and other input costs will squeeze business profitability further and curtail investment. Exports should recover as the effects of the exchange rate appreciation wear off and external markets improve. Inflationary pressures will remain important.

Significant monetary tightening has not yet produced a material slowdown in domestic demand growth, and risks of a sharp correction are increasing. The task of bringing the economy back onto a sustainable growth path would be made easier if the government delayed the planned easing in its fiscal stance, thereby allowing a more balanced policy mix for managing current macroeconomic challenges.

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