RTTNews - New Zealand inflation expectations for the next one year remained unchanged in the third quarter from the previous three months. Meanwhile, the one-year expectations for GDP growth and unemployment increased.

Monday, a report from the Reserve Bank of New Zealand said inflation expectations for the next one year stands at 1.8%, unchanged from the previous quarter. However, the two-year ahead expectations for inflation increased to 2.3% in the third quarter from 2.2% in the second quarter.

Monetary conditions are expected to be easier rather than neutral, compared with respondents who perceived the monetary conditions to be tighter in the June quarter survey.

Expectations on one-year ahead hourly wage growth dropped 0.3 percentage points to 1.7% in the September quarter. Further, expectations on the two-year rate declined to 2.3% from 2.5% in the preceding quarter.

In contrast, expectations for GDP growth for the next one year rose 0.1 percentage point to 0.8% in the third quarter. Expectations for GDP growth for the next two years climbed to 2% from 1.2% in the June quarter survey.

Unemployment over the next one year is projected to rise to 7.2%, while it is expected to fall to 6.7% over the two-year horizon.

Elsewhere, the New Zealand Finance Minister Bill English announced that the government would be extending the Retail Deposit Guarantee Scheme up to December 2011, extending the benefit to financial institutions.

The current scheme expires on October 12, 2010. The new scheme, which would begin from October 13, 2010 would be valid till December 31 next year. The scheme was initially started as a direct response to the global financial crisis.

Under the new scheme, fees to be paid by the participating institutions would be changed to reflect their risk profile. Only institutions with a credit rating of BB or higher would be allowed to participate in the new scheme. Eligible deposit-taking institutions would be covered up to a maximum of NZ$500,000 per depositor per institution, while the non-bank deposits would be to a maximum of NZ$250,000 per depositor per institution.

The planned extension will help maintain confidence in New Zealand's financial institutions while achieving an orderly exit from the scheme. It will allow both depositors and institutions to adjust back to a more normal business environment, English said.

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