Nov. 8 (Bloomberg) -- New Zealand’s economy will continue a recovery in the second half of this year, helped by the government’s fiscal stimulus, Prime Minister John Key told TVNZ.

Gross domestic product will be “quite good” in the fourth quarter, and the figure for the third quarter “won’t be bad either,” said Key, according to a transcript of the interview.

Key said the economy is being buoyed by a recovery in Australia, which accounts for about 25 percent of New Zealand exports and avoided recession. New Zealand’s economy grew for the first time in six quarters in the second quarter after interest-rate cuts, tax reductions and extra government spending.

A 48-year-old former Merrill Lynch & Co. trader, Key was elected a year ago, ending Helen Clark’s nine-year tenure. The government is reviewing tax rates on a range of income, investments, and goods and services, he told TVNZ.

“It’s about a potential change in the mix,’ the prime minister said, according to the transcript. “That’s a possibility, but I wouldn’t put it any higher than that.”

The government is also considering changing tax laws on about NZ$200 billion ($145 billion) worth of property investments that currently don’t yield tax revenue, Key said.

Currency Gains

New Zealand’s dollar has jumped 25 percent against the U.S. currency this year as the economy recovers from the global recession. That makes it the third-best performing currency in the world in 2009, behind Brazil’s Real and the Australian dollar.

Amid concern that the surging currency will derail an export-led recovery, New Zealand Reserve Bank Governor Alan Bollard said last week that the rebound will be slower and more vulnerable than in Australia. He said financial markets hadn’t seemed to appreciate the difference.

Bollard on Sept. 29 kept the official cash rate at a record-low 2.5 percent and said he doesn’t expect to raise borrowing costs until the second half of 2010 because the economy needs more support.

New Zealand’s economy expanded 0.1 percent in the three months to June. Business confidence has climbed to a 10-year high and house prices have gained 7.9 percent from their low in January, buoying consumer confidence and spending.

To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net

Last Updated: November 8, 2009 00:29 EST