The ongoing record levels of immigration are fueling New Zealand's economic growth and driving up forecasts for growth and inflation, an independent think-tank said Monday.

A report from the New Zealand Institute of Economic Research said a stronger household sector was driving much of the upward revision to growth in the New Zealand economy.

Annual average growth was expected to remain above 3 percent for the year to March 2018, before moderating to 2.4 percent by March 2020.

"There is a large degree of uncertainty over the longer term outlook, with forecasts ranging from 1.7 percent to 3.2 percent for the year to March 2020," it said.

Continued strong migration-led population growth was expected to boost household spending and residential construction further over the next few years.

Meanwhile, businesses were feeling more confident, and were more optimistic about investment and hiring.

Stronger employment prospects underpinned a downward revision to the unemployment rate -- currently at 4.9 percent -- which was expected to edge to 4.6 percent by March 2018.

"With skills shortages becoming more apparent, wage growth has been revised up," it said.

Inflation forecasts had also been revised up, with annual inflation expected to reach the midpoint of the Reserve Bank of New Zealand's (RBNZ) 1-percent to 3-percent target range by March 2019.

This led forecasters to believe the RBNZ's historic low 1.75-percent official cash rate would be the "trough" in interest rates and further cuts were not expected.

However, forecasters expected export growth to slow sharply in the March 2018 year before recovering.

"Recent developments offshore point to a shift in sentiment towards protectionism, which is negative for a small open economy such as New Zealand," it said.

source: Xinhua