GDP measures the size of the economy<\/a>.<\/p>\nEconomist Kiernan noted year-end growth was down from +4% to -1.1%. On a per capita basis, GDP is 2.8% smaller than in June 2023.<\/p>\n
Manufacturing activity<\/p>\n
Manufacturing activity is 5.8% smaller than in June 2023, but year-end manufacturing activity growth \u2013 as measured in GDP data \u2013 improved from -5.2% to -1.7%, Kiernan said.<\/p>\n
Construction activity<\/p>\n
Construction activity has been hit hard and is 18% smaller than in June 2023. Year-end growth has dropped from 6.6% to -12%.<\/p>\n
Interest rates<\/p>\n
The OCR has dropped from 5.5% to 3% and one-year mortgage rates have dropped from 6.9% to 4.9% \u2013 or better, in some cases.<\/p>\n
Current account deficit<\/p>\n
The current account deficit \u2013 that\u2019s the difference between what we export and import \u2013 has dropped from 7.5% of GDP to 3.7%.<\/p>\n
It has improved partly because of commodity prices and partly because the economy is not as overheated as it was a couple of years ago.<\/p>\n
In 2023, New Zealanders still spent a relatively large amount and imported more, compared to what the country exported.<\/p>\n
Now, that has turned around.<\/p>\n
Government deficit<\/p>\n
The Government deficit is now about $10 billion, from $7.2 billion, Kiernan said.<\/p>\n
Exchange rate<\/p>\n
The New Zealand dollar has dropped against the US. Mid-2023, it was worth about US61c and is now about US59c.<\/p>\n
Commodity prices<\/p>\n
Commodity prices have been a good-news story. Kiernan said they were up 21% in the three months to August from two years ago \u2013 meat 28%, dairy 27%, horticulture 9.4%, forestry -3.0% and aluminium 19%.<\/p>\n
\u201cIt does augur well in terms of economic outcomes going forward in provincial parts of the country.\u201d<\/p>\n
Productivity<\/p>\n
University of Otago senior economics lecturer Murat Ungor said productivity had declined.<\/p>\n
He pointed to Stats NZ data showing falls in accommodation and food services, wholesale trade, transport, postal and warehousing, driven by rises in labour inputs, without corresponding increases in outputs.<\/p>\n
\u201cResearch consistently shows that productivity is a key driver of living standard differences across countries, yet over recent decades, New Zealand\u2019s productivity growth and overall levels have lagged behind its peers.\u201d<\/p>\n
Eaqub said blaming the Government for poor productivity data wasn\u2019t reasonable, because it had been a problem for a long time.<\/p>\n
Terms of trade<\/p>\n
New Zealand\u2019s terms of trade are up 11% from June 2023 and growth has improved from -5% to +12.2%.<\/p>\n
Who do the economists blame?<\/p>\n
We asked several economists for their take.<\/p>\n
Kiernan said the problem with the Government blaming the previous Government was, the longer it went on, the less realistic it seemed.<\/p>\n
\u201cPart of the reason the economy has been weak has been the particularly tight fiscal approach,\u201d he said. \u201cWe can have arguments about how appropriate or necessary that is\u2026 if National had decided to take a not-quite-such-a-tight approach to fiscal policy, then arguably the sort of immediate economic growth outcomes and some of those other indicators we\u2019re getting through, maybe they wouldn\u2019t be quite as negative either.<\/p>\n
\u201cIn terms of their own choices about how the hell we get back to something more sustainable, they do have to take some responsibility for it themselves, and it\u2019s just a question of whether you think they\u2019re doing the right thing or not.\u201d<\/p>\n
He said lower interest rates and higher commodity prices promised economic improvement.<\/p>\n
\u201cIf we went back 18 months, people were saying \u2018Thrive in \u201925\u2019 and then it was \u2018Survive until \u201925\u2019. Now I\u2019m telling people \u2018Stay in the mix until \u201926\u2019, because it\u2019s very hard to find things that rhyme with \u201926.\u201d<\/p>\n
Equab said people blamed too much on the Government.<\/p>\n
\u201cI think everybody\u2019s saying, because they\u2019ve been in charge, this is all at their feet, and I think that\u2019s completely unfair. You know, governments don\u2019t have tools that work that rapidly.<\/p>\n
\u201cGiven that this recession turned out to be deeper and longer, are they responding to the evidence in front of them? That\u2019s what matters.\u201d<\/p>\n
He said tax cuts were meant to put a floor under consumer spending and had not.<\/p>\n
\u201cGovernment policy in terms of reducing government spending was meant to unleash private sector spending, which was very naive in the middle of a recession with lack of confidence, interest rates relatively high, global uncertainty, all those kinds of things.<\/p>\n
\u201cIt was essentially the wrong prescription for the middle of a recession.\u201d<\/p>\n
He said there was a missed opportunity to invest in \u201cboring\u201d stuff that was eventually going to be spent on anyway.<\/p>\n
\u201cWhat we find in this period of demand failure, which is a recession, is you need somebody in the market to act. That somebody who can do that is government, because \u2013 particularly when it comes to things like infrastructure \u2013 you\u2019re going to buy that stuff anyway.<\/p>\n
\u201cYou either buy it today or tomorrow. We need more boring stuff done sooner.<\/p>\n
\u201cMaintenance projects that have been languishing for the last 10 years… bring it on.\u201d<\/p>\n
Ungor said the economic recovery was fragile and uncertain.<\/p>\n
\u201cThe Government\u2019s commitment to fiscal consolidation may prolong weakness in the near term, although structural reforms could support stronger medium-term growth. The outlook is also highly dependent on global developments, particularly trade relations between the US and China.<\/p>\n
\u201cNew Zealand\u2019s reliance on agricultural exports to China makes it vulnerable to any deterioration in Sino-American trade relations. However, strong commodity prices and previously aggressive monetary tightening \u2013 which now allows room for easing \u2013 provide some grounds for cautious optimism.<\/p>\n
\u201cGiven these challenges, the Government\u2019s focus on economic growth is appropriate, although the effectiveness of its policies remains to be seen.\u201d<\/p>\n
Wesselbaum said there had not been a way to unwind the 2023 situation without a downturn.<\/p>\n
\u201cI don\u2019t think that there is any fair criticism of the current government in this. If there is something that needs to change, then it is the low productivity \u2013 but that\u2019s not exactly news for New Zealand.<\/p>\n
\u201cHistory has shown us that leaving stagflation, you need sound monetary and fiscal policy, and supply-side policies, and that this takes a while.<\/p>\n
\u201cGiven this, it\u2019s very hard to judge the economic performance of the current government over the past two years.<\/p>\n
\u201cAt best, you can say that the situation stabilised and that a credible fiscal policy, the focus on an economic growth strategy, coupled with movements towards improving the supply-side \u2013 de-regulation, productivity \u2013 have set the stage for future growth.<\/p>\n
\u201cIt is fair to say, though, that the next year should see an improvement in economic activity \u2013 without any major events.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The unemployment rate was 3.7% in June 2023 and is now 5.2%. Infometrics chief forecaster Gareth Kiernan said…\n","protected":false},"author":2,"featured_media":37383,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[74,219,813,30271,12410,34436,221,185,111,43,139,69,812,223,26671],"class_list":["post-37382","post","type-post","status-publish","format-standard","has-post-thumbnail","category-new-zealand","tag-after","tag-economy","tag-edmunds","tag-figures","tag-gdp","tag-gloomy","tag-how","tag-is","tag-new-zealand","tag-news","tag-newzealand","tag-nz","tag-susan","tag-the","tag-tracking"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/37382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=37382"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/37382\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/37383"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=37382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=37382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=37382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}