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Our GDP data no cause for alarm

The latest figures released today shows that New Zealand’s Gross Domestic Product fell 0.1% in the March quarter, putting the New Zealand economy in technical recession, said NZCTU Economist Craig Renney.

“With the data being so close to zero, we shouldn’t exaggerate what the word recession means. If we were to exclude the impacts of Cyclone Gabrielle, then it is very likely that GDP would have been flat or positive.

“The annual data shows that New Zealand’s economic growth is comparable to Australia, Canada, and higher than the UK and Europe. With strong employment and wage data, the economy is well placed to manage the current challenges.

“The fall was well inside market expectations and was driven in part by the impact of the cyclone activity earlier this year. On an annual basis, GDP growth of 2.9% was still registered, which showed the strength of the economy earlier this year. Falls were concentrated in business services, and general government consumption also lagged private sector consumption.

“This data will support the Reserve Bank’s view that further increases in the Official Case Rate aren’t necessary, it had predicted recently that GDP would be positive at this point. The Treasury had also predicted that GDP growth would return this quarter. This supports the NZCTU view that the current level of government spending is appropriate, and that faster fiscal consolidation would simply harm the economy further.”