Risks and opportunities for the New Zealand economy are finely balanced, according to the latest BusinessNZ Planning Forecast.
BusinessNZ Chief Executive Phil O'Reilly said yesterday there was growth in the construction, manufacturing and services sectors, employment growth and investment intentions remained strong and inflation was well under control.
But the latest results for global dairy prices gave cause for some concern.
Global dairy prices had recovered some of the ground lost over the last few months, but a recent substantial dip in prices could conceivably lead to a cut in Fonterra's forecast payout, he said.
While strong inward migration was sparking demand in the economy, it could also bring inflationary pressures, especially in the Auckland housing market.
''Given such pressures, the Reserve Bank is likely to continue with its loan-to-value ratio regime for some time.''
The survey showed investment intentions had remain relatively strong as seen by several business opinion surveys.
Headline employment growth had not been matched by a reduction in the official unemployment rate, simply because the labour force participation rate was now at an historic high, Mr O'Reilly said.
Strong net inward migration was a two-edged sword.
While population growth would increase demand, it came at a potential cost of greater inflationary pressure, particularly in respect to Auckland housing.
Given such pressure, the Reserve Bank was likely to continue with its lending restriction regime, he said.
New funding mechanisms, such as peer-to-peer lending platforms, might be a way of getting around tighter Reserve Bank lending controls on traditional bank mortgages.
''Time will tell whether there is a gap in the market for such new financing options, particularly in the mortgage market and with regard to the general consolidation of debt.''
• The BusinessNZ Planning Forecast incorporates BusinessNZ's Economic Conditions Index (ECI) which tracks 33 indicators, including GDP, export volumes, commodity prices and inflation, debt and confidence figures.
The ECI sits at 17 for the March 2015 quarter, up five on the previous quarter and up nine on a year ago.
