Export earnings are set to take a backseat to domestic demand in driving growth, according to ASB chief economist Nick Tuffley.
While export commodity prices are easing, households are showing greater signs of life, with spending growth edging up and the housing market continuing to gain ground.
"Continued strength in the NZ dollar is likely to remain part of the 2012 economic environment," he said.
"Going forward we expect more fundamental drivers to have greater influence. In the second half of this year, the global economy should be on a firmer footing and NZ will be even closer to OCR increases, lifting the NZ dollar towards 90 US cents in early 2013."
He said Europe has made better progress of late in dealing with its debt crisis with the situation "less perilous now compared to late 2011", but hurdles remain. "We expect Europe will continue with its 'muddle through' approach to keeping the crisis from becoming more severe."
However, another risk is rearing its head.
"Oil prices have been on the rise this year, and petrol prices are back around past peaks, prompting us to look at the potential impact of this threat. Recent IMF research suggests that, although continued high prices will have an overall dampening effect on global growth, the impact is likely to be very modest. In New Zealand our oil usage is more efficient as we respond to a decade of high prices. Higher oil prices also benefit NZ literally through the increased appetites of oil producers for dairy and meat."
That's a signal to use less and innovate more, he said. And Kiwis were using more fuel‐efficient and/or smaller‐engine vehicles and public transport.
Tuffley said the impact of recent price increases will be unlikely prove a serious impediment to global economic growth, with the current outlook for our main trading partners around the long‐term average.
Meanwhile, BNZ's latest confidence survey – the third for 2012 – has shown sentiment improving yet again.
A net 34 percent of 400-plus respondents expect the economy to improve over the coming year. This is up from a net 27 percent in March.