Prospects for the New Zealand economy are looking weak, according to the latest assessment released today by independent economic researchers BERL.

“The hits to the New Zealand economy just keep coming. And as the global financial markets continue to haemorrhage, our problem is that the New Zealand economy doesn’t have that much fat with which to absorb these hits,” said BERL Senior Economist and Editor of BERL Forecasts, Dr Ganesh Nana.

Nana continued, “Over the past couple of years we have managed to bring the economy to a halt in order to rein in inflation, but our timing could not have been worse.

“What is needed now is a measured, rather than knee-jerk, response. Further interest rate cuts may provide some relief, but the key factor is the supply of credit rather than its price. New Zealand businesses will find it more difficult to access necessary funds for development projects or even for daily cashflow requirements.

“In this situation, fiscal policy needs to step up and play a more central role in bolstering demand and thereby also shoring up confidence. The public sector would be better positioned than business to access funds, which will also be relatively cheaper now. Consequently, a sizable, concerted, co-ordinated public infrastructure investment programme would be ideal about now. But, don’t expect even this to bring about a quick fix, as the financial turmoil looks set to be with us for some time,” concluded Dr Nana.

Click here for the media release (PDF) and here for the full report.