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Inflation, unemployment tipped to fall

Inflation expectations are easing, if the Reserve Bank's latest quarterly survey of expectations is anything to go by, with respondents tipping a 2.94 percent rate for one year out.

Inflation expectations are easing, if the Reserve Bank's latest quarterly survey of expectations is anything to go by, with respondents tipping a 2.94 percent rate for one year out.

Both the one-and two-year series dropped below the 3 percent mark., with the mean expectation for inflation two years ahead running at 2.86 percent after having jumped to 3 percent in the previous survey.

The unemployment rate, on the other hand, is projected to decrease to 5.9 percent in a year and 5.5 percent in two – lower than the latest published official unemployment rate for June 2011 of 6.5 percent. 

Positive growth of 0.6 and 0.8 percent is expected for the June 2011 and September 2011 quarters, after GDP leaped from 2.1 to 2.9 percent last quarter. The latest Statistics New Zealand data indicates real production-based GDP increased by 1.4 percent between March 2010 and March 2011.

GDP projections

Monetary conditions are currently perceived as being easy, but an increasing number of respondents expect conditions to become tighter over the next year.

Nearly a fifth – 18 percent of respondents said monetary conditions were easier than neutral. But looking ahead to the middle of next year, an increasing number of respondents – a net 20 percent - believe conditions will be tighter.

The survey polled business managers, in finance, agriculture, labour and business, who also see hourly earnings and interest rates rising in the near future.