The downturn in the global dairy market is slowing growth in the New Zealand economy, and eroding business and consumer confidence, an independent economic think-tank warned Wednesday.

The effects of reduced farm income would reverberate through the economy as farmers reined in spending to ride out the poor seasons, according to the Quarterly Predictions report from the New Zealand Institute of Economic Research (NZIER).

"We expect annual average GDP growth to dip to close to 2 percent by the end of this year, before rebounding over 2016 as the boost from the lower New Zealand dollar filters through to a broad range of exporting sectors," said an NZIER statement.

The outlook for many other sectors was positive and the economy was receiving a boost from continued strong net migration, said the statement.

Construction remained solid and was expected to remain a key support of economic activity through the next five years.

"Many export sectors are seeing an improvement in demand, with the lower currency providing an additional boost to incomes. Tourism is a standout, as more people are coming to visit New Zealand, staying longer and spending more. Meanwhile, demand for other commodities including beef, wool and kiwifruit is strengthening."

The NZIER forecast the Reserve Bank of New Zealand (RBNZ) would make two further cuts to interest rates by the end of the year as it struggled to bring inflation back to the midpoint of its 1- percent to 3-percent target range.

"Inflation in the New Zealand economy remains very soft, reflecting low global inflation and the earlier effects of the high New Zealand dollar," it said.

The RBNZ has cut the official cash rate twice this year each time by 25 basis points taking it down to 3 percent. Endi

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