Data releases during August pointed to robust demand in the
household sector in the June quarter, supported by solid
growth in jobs and employment income, the Treasury said
Releasing its August monthly economic indicators, the
Treasury said spare capacity in the labour market continued
to be reduced as the unemployment rate fell.
Other indicators continued to point to a more moderate pace
of expansion ahead than in recent quarters.
Business and consumer confidence, while elevated, were below
the peaks achieved earlier this year - consistent with
tightening monetary conditions, slower rates of house price
appreciation and a weakening in dairy prices.
''That said, the pace of economic growth is still expected to
be above trend and inflationary pressures are likely to
gradually build given spare capacity has been exhausted.''
Growth would continue to be supported by the Canterbury
rebuild and elevated domestic demand as the net inflow of
external migrants remained high, the Treasury said.
Dairy prices had continued to fall from their peak in
February and were starting to flow through to the trade data
in the form of a decline in export values.
It was assumed dairy prices would stabilise and improve later
this year as seasonal factors reversed and Chinese stock
Growth in the major economies was uneven in the June quarter.
GDP expanded strongly in the United States, but stalled in
the Euro area and contracted in Japan. Chinese activity
appeared weaker going into the September quarter.
Differences in the economic outlook of the major economies
had also been reflected in their contrasting monetary policy
Financial markers had been affected by geopolitical risks,
the Treasury said.