Solid economic growth with modest inflationary pressures meant only 13 per cent of financial services firms expect interest rates to rise over the next year. Solid economic growth with modest inflationary pressures meant only 13 per cent of financial services firms expect interest rates to rise over the next year. Indications are that 2015 will be another strong one for the New Zealand economy, going on the latest batch of economic reports. The New Zealand Institute of Economic Research (NZIER) and HSBC said growth was robust in 2014 and likely to flow through into the current year, although the NZIER was more circumspect in its overall assessment. Solid economic growth with modest inflationary pressures meant only 13 per cent of financial services firms expect interest rates to rise over the next year, down from 66 per cent in September, according to the NZIER's quarterly survey of business opinion (QSBO). Business confidence remained at historically high levels, but profitability remained weak as firms lacked confidence to push up prices in spite of comparative economic buoyancy, according to the QSBO.

"The economy is not nearly as strong as we think," NZIER principal economist Shamubeel Eaqub told a briefing in Wellington, even though annualised growth implied by the QSBO of 3 per cent in the March 2015 year is high by historical standards. That said, growth has resumed after a lull in mid-2014, the survey found. "Business confidence has stabilised at 21 per cent net optimists, after adjusting for the usual seasonal variations," NZIER said. "While optimism has faded from the heady highs of late 2013 and early 2014, firms are optimistic relative to history." HSBC chief economist Paul Bloxham, the economist who last year gave New Zealand's economy "rock star" status, said the growth trend was intact. "We expect GDP growth to have run at 3.3 per cent for the full [2014] year, well above trend," Bloxham said. Growth was driven by a strong pick-up in construction, rising dairy exports and buoyant consumer spending, he said. HSBC said GDP growth would slow to 3 per cent this year but would still see New Zealand outperform most other developed nations.