Slowing inflation and booming immigration are expected to help prevent New Zealand going into a recession over the next 18 months.

Economics consultancy Infometrics says the economy had been more resilient than first thought, despite severe stresses over the past three years.

Its latest report says inflation will be brought under control by Reserve Bank rate rises, without a recession.

In predicts annual growth of 0.9 per cent during 2024 - higher than previously forecast.

"The fact that inflation is heading in the right direction while growth is still, generally speaking, remaining slightly positive is a pretty good outcome for the economy, given the sort of stresses that we've been through and the excess demand that has been throughout economy over the last couple of years," says Infometrics chief forecaster Gareth Kiernan.

Over the next 18 months, growth is expected to be "patchy", he says.

"But given the strength of population growth, given that households in general seem to be remaining pretty resilient to higher interest rates, and the labour market is still strong, we're expecting the economy to avoid another recession."

Immigration is a significant factor boosting the economy, Kiernan says.

"We've got record high numbers of people coming into the country and that is helping to just ease a lot of those labour market pressures and stresses that we saw last year, as well as helping to stimulate demand and leading to a bit of a resurgence in the housing market as well."

However, migration could not continue at existing rates, Kiernan says.

"We saw through the second half of last decade, with strong migration over a number of years that it really did contribute to stresses in the housing market and stresses on the border economy, in terms of our infrastructure being able to cope with all those extra people.

"You certainly don't want people coming in at the rate we've seen over the last year, on an ongoing basis."

Migration is likely to drop over the next 18 months, because the demand for workers that built up during the pandemic had eased since borders opened, he says.

Unemployment is at 3.6 per cent, but likely to rise, Kiernan saya.

"We're not expecting a massive lift in unemployment over the next year, but as the pent-up demand for workers that we've seen with the borders being shut, as that is satisfied we're expecting unemployment to push a bit higher from here up towards 4.9 per cent in 2024."

House prices were likely to increase by 5 to 10 per cent over the next year, he says.

"There is a bit of upward pressure coming through in the housing market, due to the strong migration and the demand that is generating.

"We expect that to continue to push up house prices through the next year.

"A change in government policy around investors and the rules around tax that apply to them... could add to the demand for housing as well."

Kiernan says there had been plenty of good news, with more growth than expected and easing inflation, while the consumer price index rose 1.8 per cent between July and September, also better than predicted,

"Looking forward through the next year, we're not expecting interest rates to be cut any time soon, but it now looks like there's no need for the Reserve Bank to lift the Official Cash Rate further."

Farmers and small towns were facing tough times, Kiernan says.

"With the very weak global economy, in China in particular at the moment, that's weighing on commodity prices, so our export revenue is under plenty of pressure across the likes of meat, dairy and forestry.

"With costs having risen substantially for producers over the last two to three years - higher fuel prices, higher interest rates, higher fertiliser costs - you put all that together and profitability does look tough for farmers at the moment.

"That's going to weigh on some of those provincial economies over the next year or two."

-RNZ.