It expects the December quarter growth to be led by migration-induced population increase and the "considerable stimulus" from monetary and fiscal policy.
"Signs of life in leading indicators ...means we are cautiously optimistic about a recovery from later this year," NZIER principal economist Shamubeel Eaqub said in the institute's quarterly predictions, released today.
However, the institute estimated a 2 percent contraction in the March 2009 year, followed by another year of contraction, of -1.4 percent, in the March 2010 year.
"Despite our forecast of a seemingly strong recovery, the impact of the recession will take some time to unwind. We estimate real GDP per capita -- economic wide income per capita -- will not return to the pre-recession level until late 2011."
The predicted recovery path would average 3.5 percent over the following five years, Mr Eaqub said.
"The trend will be well below that seen in the past decade, equating to reduced income of around $10,500 per person per year over the next five years," he said.
The economic environment would be difficult for both business, due to reduced demand, and households, due to lower wage increases.
Rising unemployment would also persist until mid-2011, when the unemployment rate was likely to peak at 7.8 percent , he said.
