Bollard Says N.Z. Economy Won't Recover Until Second Half

By Tracy Withers

July 2 (Bloomberg) -- New Zealand's economy won't recover until the second half of the year, CentralBankNews.com reported, citing an interview with Reserve Bank Governor Alan Bollard.

``The second quarter will be roughly flat followed by a soft pickup later in the year,'' Bollard said, according to the Web site. ``We think we're in for a softer year.''

A report last week showed the economy contracted 0.3 percent, matching Bollard's June 5 forecast. Eight of 13 economists surveyed by Bloomberg News expect the economy also contracted in the second quarter, putting New Zealand in its first recession since 1998 and raising the prospects of interest-rate cuts as early as this month.

``We expected the 0.3 percent contraction,'' Bollard said. ``That doesn't mean we're not disappointed. We are. And it represents quite a significant slowdown.''

A Reserve Bank spokesman confirmed the interview took place. He declined to comment further.

Bollard, who spoke on the sidelines of a Bank for International Settlements conference in Basel, Switzerland, said a weak housing market and drought led to the first-quarter contraction.

``Housing has dropped off quite a lot, which has affected household consumption,'' he said. ``Also, we had a drought in the west coast, where more of the dairy industry is, and as a consequence we lost probably NZ$500 million ($380 million) of dairy production.''

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.
Last Updated: July 1, 2008 17:22 EDT