The economy will grow at its slowest rate in seven years over the coming months according to the New Zealand Institute of Economic Research.

It warns inflation is a gathering menace and could lead to further interest rate increases. The private forecaster's quarterly predictions state the economy will grow 1.3 per cent in the year to March, down from the 2.1 per cent growth forecast in the previous survey in May. It says domestic spending is shrinking, due to mortgage rates above 10 percent.

The NZIER predicts the recent drop in the value of the New Zealand dollar will lead to increased fuel costs, which will also take money out of consumers' pockets.

Spokesman Brent Layton says the Reserve Bank is in a very difficult position with the inflation outlook not good, the economy growing very slowly and interest rates already at a level that should shrink the economy.

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Auckland City Council has decided not to sell its 12.75 percent stake in Auckland International Airport.

Ninety percent of submissions were against the sale of the council's shares and councillors say they have listened to the people.

Ratepayers also want legislation in place to ensure future councils do not sell the shares or other strategic council assets.

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Legal action against the former Feltex directors is set to go ahead.

Christchurch lawyer Garry Wakefield and investment banker Tony Gavigan are spearheading the action claiming the initial share prospectus and a second share offer painted an untrue picture of the company's financial status and future prospects.

Carpet maker Feltex was put into liquidation in December after being bought by Australian manufacturer Godfrey Hirst.

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On the sharemarket, the NZX50 is six points higher on 4,125.

Wall Street is closed today for the Labour Day holiday.

The New Zealand dollar is trading at 70.15 US cents, 85.38 Australian cents, 51.51 euro cents, 81.28 yen and 34.73 pence.

The 90 day bank bill rate is 8.70 percent and the TWI is 67.67.