New Zealand’s economy contracted more than 2% between March and September, according to new and revised data released on Thursday.
Statistics NZ said Gross Domestic Product (GDP) fell 1% in the September quarter and 1.1% in June, revised downward from -0.2% as at the original time of the data release.
The data collection agency has significantly revised its historic releases and now believes economic growth stalled in 2022 but didn’t begin to decline until June this year.
Jason Attewell, a macroeconomic spokesperson at Stats NZ, said an annual reassessment of the structure of the New Zealand economy had shown overall growth was stronger than thought.
Previous data releases showed meaningful falls in GDP during 2023 which were considered to be a ‘technical recession’. Updated data shows only one quarter of contraction in March 2023.
Stats NZ said these revisions hadn’t changed its assessment of the current size of the economy only the path it took to get there.
The economy is now smaller than it was in June 2022 and the recent six month decline in GDP is the largest since the 1990s, excluding the short-lived Covid shock.
Economists expected the revisions but may have been surprised by the sharp decline in September. ASB predicted a 0.4% fall, while the Reserve Bank expected just 0.3%.
The largest decline came from the goods-producing industries, which contracted 2.8%, as high electricity prices during the winter stunted production. Primary industries grew 1% as dairy exports grew.
190 Comments
Cutting NZ government spending by several billion dollars ("Austerity") was always going to exacerbate the recession to be deeper and longer than necessary. Only an idiot didn't realize this would be the result of the coalition policies - but apparently there are plenty of idiots in the coalition.
Probably slightly better GDP growth (as GDP = C+I+G+(X-M)), but much larger deficits to support it (i.e 6- 7%), higher rents due to interest deductibility no longer being 'temporarily looked through', higher inflation due to continued high spending + high spending signals leading to higher inflation expectations, and higher interest rates as a result.
Doesn't sound great. A couple bucks off on fresh fruit and vege on the bright side.
I feel the actual makeup of the crown core expenses is missed in a lot discussions about the cuts.
https://budget.govt.nz/budget/2024/at-a-glance/revenue-expenses.htm
Core government services where I would guess is where most of the unnamed bureaucrats that people want to get rid of to save money, is only 5% of government expenses. Trimming 10% of that is nothing, .5%, its purely and ideological on government departments, rather than a serious attempt to cut spending and make things better.
To make any real difference you need to cut the biggies, health, superannuation, social security, and education, and really make things worse for the average New Zealander.
Putting words in my mouth again Jimbo?
I have advocated for several years for cutting the massive bloat in policy roles in Wellington. I support the current government’s actions on that front.
However:
- I never advocated for cuts in frontline services, quite the opposite. I have indeed advocated for a big uptick in frontline healthcare staff in particular
- I never advocated for austerity, quite the opposite: I would like to see much more spending on infrastructure, and housing. And before you note my past criticism of Kainga Ora - that criticism was not on building houses per se, but how the organisation went about things and how bloated they were. I believe they could have built many more houses if they were an effective organisation
Agreed. Imagine what tax still in full swing, daily govt leftist gobblywoke, gangs running further amok, further bloating of govt service, and further blow outs on govt debt would have left us with.
Simply more higher tax earners in Straya and more 501s in return. Shudders while looking at the math of that.
Where to start with your rose tinted delirium? Taxes are higher and more numerous in Australia, so why would we lose high income earners there? Gang numbers are higher than they were a year ago according to governments own official figures as they have been unable to make no changes to Australias 501 policy (unfortunately its harder for police and general public to see them now that they can't self identify by wearing patches), and government debt is going far higher under the new government as they lowered their tax take on unaffordable tax cuts, while at the same time tanking the economy by radically reducing government infrastructure spending in the middle of a recession (which is the opposite of basic corect economic policy in a recession).
Taxes are lower as a % of GDP in Australia by about 5% of GDP which is substantial. We are right on the average. Stop just looking at the top tax rate and consider the impact of all the deductions lol. You can still reduce income tax outside of ya rental through negative gearing in Aus. Can't in NZ
https://www.oecd.org/content/dam/oecd/en/topics/policy-sub-issues/globa…
what are you talking about? must be a weird dissonance going on in your head right now.
Tax is now just a little better but costs have escalated elsewhere and it's worse than before.
Social housing, Ferry, Water Infrastucture and Hospital builds have been wrecked and the accompanying rightist gobblywoke is much worse than before
Gangs patches coming off has done nothing to curb gang activity and is just as bad or worse than before
The Govt. service has hardly shrunk but morale and services are just as bad or worse than before.
Blow out's on debt are now MUCH MUCH worse than before
Tax earners have moved to Australia in greater numbers than they did before.
Any more reckons you need putting right?
Your math must be as good as the Finance Ministers because I'm not seeing many KPI's or targets being met which are all just as bad or worse than before.
When are people going to admit it - The Left are just better at running the Govt. and social services in General
The Right should stick to managing their trusts and rental portfolios
Exactly, we have been served poorly by all three.
Orr is the equivalent of a daytrader who somehow has a knack for buying the top and selling the bottom. His timing and direction was all wrong, and we are paying the price now.
The last government spent like there was no tomorrow when it should have been more reserved and took the approach of the only thing that matters is how much money is being spent, not the quality of the spending, due to slavishness to their ideology.
The current government is cutting spending with seemingly no consideration as to how "considered" government expenditure might actually stimulate the economy, due to slavishness to their ideology.
and I suppose that happened because of the mismanagement and debt pile of the Key years? Proportionally as a % of GDP both the Key and Ardern governments borrowed the same amount (20%). Key delivered quite a lot for his debt pile, but debt is debt and no government, including the current, has any real ambition to pay any of it off before the outer years of their turn (in other words, easier to just get voted out than actually deal with it).
I blame Key more the Jacinda. Simply because the guy had the financial skill to know what he was doing. Ignorance was not his excuse.
Jacinda was ill equipped and made serious blunders. But they were not deliberate, she just didn't know any better.
Key did, He knew he was enslaving NZ inc to the global banksters - his masters.
I think both of them were keen on retaining their high polling, which spending gave them. They both used crises to justify "building back better", which is popular in the main.
But Key also sold a bunch of stuff, so his borrowing is artificially small. Those sales cost us in dividends longer term that we never replaced with higher taxes. It's cynical politics.
I don't vote because none of the parties are sufficiently not terrible to deserve my vote. However I do not think this registers on any level as a vote of no confidence in all the parties / the system in general. I think the media, public & powers that be would frame me as apathetic.
well I was one who voted them in - really glad to get rid of the other destructive socialist clowns
and having operated a business here for 25+ years I understand exactly how bad a place we were in
The disapointment is that the Nats are being so weak sorting the issues
and to many people in NZ are still expecting the govt to deliver Nirvana for them
Do you notice there's a pattern where ex PMs leave the country after they're done? Clark went to the UN, Key bought his Sydney house, Ardern went to Harvard. I imagine Luxon will go back to Chicago?
Surely this is an anomaly. Though Luxon, Key and to an extent Ardern essentially lived/worked overseas most of their lives before politics.
National have taken their eyes entirely off the ball. Their entire economic policy was restoring tax deductions. It has failed.
Meanwhile they are spending their time focusing on culture war things, tunnels under Wellington and Micro-managing councils. Willis is missing in action and luxon is a waste of space.
Turns out we have the wrong people at the top in the jobs at a critical time. We need the folks that are there to make the tough decisions. We dont need people that are just there for the titles.
The biggest economic contraction since 1991 they just said on RNZ. The current b-team dont have what it takes to get us out of this problem.
Your strawman blameshifting is conflating monetary policy with fiscal policy. Monetary policy is RBNZ responsibility.
The implication that the current Opposition would provide better fiscal & economic management is beyond laughable, considering how we ended up here.
No one is denying that Labour played a significant role in the current situation and it would be a disaster if they return in current shape.
But, there is a case to be made that coalition have made things worse if anything. If the fact that they are making things worse at a slower pace than Labour would is enough for you - great!
Indeed. It's like saying it's better to die of cancer than a heart attack. But also, it's fair to say every government in the last 30 years in NZ has been worse than the one that came before it. Given another 5 years I fully expect the current one to look as bad, if not worse, than the previous one having broken or bent nearly all their promises and commitments only one year in.
And the real problem is Labour can sail into 2026 with a pitch for earlier surplus via tax. Whether you like it or not, their CGT/wealth tax is a viable solution to the deficit. Combined with tall poppy syndrome, many kiwis would opt to go with that solution to bring debt down sooner and get back to the lolly scrambles before 2032. It wouldn't probably create growth or prosperity, but it would probably please the ratings agencies and look "responsible". Assuming the public sector has already been right-sized by 2026, they wouldn't even have to do any dirty work.
Pffft. It's established in economic management that the government becomes the spender when there is a general contraction, to keep the economy afloat. They should be anti-cyclical in their spending. National have gone pro-cyclical, reducing government spending when it should be increased. But its clear that the people in charge had never read an economic text book, so decided bringing in austerity during a downturn, would somehow work, despite the same never working anywhere else before ever. There is plenty of recent examples of austerity policies causing doom loop economic contractions, like the one we find ourselves in now. But we are special, right? RIGHT? (oh damn, the GDP drop says we aren't).
The RBNZ had some hand in this, but they aren't the main driver. 11% of Wellingtons jobs are gone and that's just the first round of austerity during business contraction cycles. Other districts are around half to that or a bit less. That's mostly government policy driving those job losses.
I agree with you.
Yes, the Nats/Coalition inherited a mess, but have done very little to turn the ship around since coming to power. Not only could we not afford the tax cuts to property investors, we could not afford the distraction of the coalitions policy compromises - specifically the treaty principles bill. Instead of debating economic growth agenda's, we are fighting amongst each other. We are all going to pay a price.
I don't know why anyone thinks putting an English Lit major who hasn't read anything on economics, cannot describe Austerity, cannot describe productivity, believes running the government books is equivalent to running a household... would be anything but a disastrous finance minister.
Isn't most of the criticism about Labour that they were stimulating the economy too much? That doesn't seem like something that would cause GDP to drop like it has recently. You know what would cause GDP to drop rapidly? Cancelling a whole lot of projects and firing people...
This is 100% incorrect. The cause of the current economic collapse is the current government cutting spending in the middle of a recession, thereby making the recession a lot worse and longer. Even a first year economics student knows that the correct government policy in a recession is to INCREASE government spending, not decrease it. The fact that National of all parties is doing the reverse of obvious economic policy is an absolute disaster.
I reckon the plan should have been to increase spending in key areas (frontline public services, basic infrastructure, etc.), while still cutting meaningless jobs in back-end bureaucracy.
However, NACT was so overwhelmed with ideological rhetoric and waging war on bureaucrats that they completely ignored their spending and investing role as a government.
WTF?? The cause of the inflation blowout was QE, nearly zero interest rates & government forced productivity nosedive (AKA lockdowns) - some was imported of course because other countries were doing the same ridiculous things we were doing - just not as bad. National ARE spending - way too much - Willis is borrowing MORE than Robertson. What we need is way way better productivity (by getting rid of the unproductive public sector as much as possible except frontlines) & policy which ENCOURAGES investment and innovation in the private (productive) sector.
As Jfoe keeps saying, the global price level increased by approx 30% after Covid. How exactly were we meant to stop this happening in NZ too?
National are cutting spending on public sector jobs, infrastructure, etc then having to spend more money supporting people who are unemployed. Who would have thought! Then they borrowed for Tax Cuts, cutting their income.
We do need better productivity, but cutting the public sector to achieve that is just ideology and not based on evidence at all.
It's a mix of useless leaders and policies.
- focus on residential housing as investment
- awful immigration policies importing people who don't contribute to society of financially (tax)
- rbnz terrible ocr settings . Terrible forecasting and reactions.
- terrible management of trade and borders during covid
- duopolies etc (banks, supermarkets)
- no action to stop the exodus of young skilled peeps
- wasting money by successive government and no saving for rainy days
- no huge infrastructure investments now when we need them
Bit of a joke nz... I can't see why the 'experts' now think the worse is over. They must have a magic export industry about to launch in nz
Well folks, that's what you get when you mix a government who "bloated" the public service, full of people that couldn't even balance a check book, then spending millions of taxpayer $$$ on some "pet project" that happened to tie in with their university studies, that convinced them that was the way to go - and don't listen to anyone else, as what would they know ?
Then you have employers, so terrified of having to raise wages (thinking that's the only way to cut back expenses) so loving these immigration numbers, as they can employ someone from overseas and not have to raise salaries/wages at all - as they will work for less ! Who cares if overall productivity goes down - as long I have the "big house , holiday home and a boat moored at the nearest marina".
Mix that in with the property crazed landlords and their precious "property portfolio", to enrich their family trusts etc, while extracting as much cash out of the wage earners pocket as possible . All boosted for them by favorable tax conditions, while they think they are doing society a "favour" by supplying a house for rent, when in a country like NZ, property prices should reflect average incomes and these same people should be able to buy a house - not just benefit the greedy banksters and some landlords that think they are a "financial genius" because of basic market timing.
Then we have that strata of NZ society that is constantly is looking for a "hand out" while bleating it's everybody else's fault BUT mine ! This "do nothing - everyone owes me something" brigade permeates throughout NZ society.....and is now becoming (or is) generational.
Cap that of with governments, that are all to scared to take the corrective measures that could actually improve things, all because they may not get voted in, in the next election..... pathetic, where are the leaders in NZ with a backbone ???
Pretty much. The party seams to be pretty much captured by large land owning interests. Their whole policy platform is designed around serving the interests of these benefactors (removing removal of interest deductibility). It was interesting seeing Arena Williams discussing the fast track approvals bill. In essence this is bill is designed to give tax free money in the form of land price appreciation to all the major doner's of the party. This is pretty much the backbone of their economic policy. Enrich a few special interests and let the rest of the economy go to the dogs. Relevant link below
https://www.reddit.com/r/auckland/comments/1hgonlb/cronyism_at_its_fine…
You'd think a far more efficient and equitable option to fast track is simply to suspend the RMA for a year, for any project that's on private (not crown) land. Doesn't favour anyone in particular, but anyone with a plan to do something can just do it. Make them actually start the project within the year to be eligible, rather than these wind farms with 20 year open consents that are just to boost their stock price and lock out competitors.
And it would avoid the most contentious, corruption-prone things like mining and oil which are not on private land. Unless they are, in which case go for it.
Yup. As expected. The double whammy of this government borrowing far, far more than they promised and a shocking growth outlook.
The NZ/USD cross has broken through all recent troughs and we now need to go back to October 2022 when it hit 0.55. Methinks we'll be testing that mark very shortly. ... Virtually guaranteed if the rating agencies cut our credit rating.
Far out man, the coalition are making it worse. There is fuck all Orr can do if the coalition push through an austerity approach going into and during a recession.
This austerity approach has been done many times before and failed miserably. Was the Bank Of England able to bail out the Tories? No.
It's out of Orr's hand now.
Labour's mistake was not enacting the right fiscal strategy as Orr cut. National is making the same mistakes but in reverse.
I didn't vote for the coalition, and I am not a fan of austerity. But have they really cut that much? Just over 2000 jobs according to this: https://www.rnz.co.nz/news/national/530400/two-thousand-jobs-lost-from-…
Let's say they earned $100k each, that is $200 million, a pittance really.
I think Orr could easily stimulate the economy by slashing the OCR. But it would probably be another mistake to add to his big list of mistakes...
They canned shovel ready projects in favour of business cases for RONS.
They also cut funding from Council's that rely on that finding to progress their local projects.
And during the transition, the effect was essentially to put all public tenders on hold as people awaited what f**wittery Simeon decided to pull out his troll arse.
For ideological reasons, nothing more. Yes they have cut massively and this is reflected in the dire figures.
Yes they have cut massively and this is reflected in the dire figures.
Do people expect things to get better before they get worse? Isn't that inconsistent with the idea of creative destruction?
One thing about Aotearoa attitudes and behaviors is that you can always expect that we look for a scapegoat to blame.
You mean what the government AND the RBNZ are doing to the economy. The RBNZ is there to keep inflation stable. We really need the government to step in with some big stimulus programs but they won’t because they got elected on the opposite mandate - but that now could be their archives heel for the next recession if they refuse to do a 180 on their policy positions (and I’m politically unbiased on this - didn’t vote National or Labour last election).
There's been a sustained exodus of productive workers and enterprises from NZ over the last few decades, thanks to growing favour for rentierism. This got supercharged over the last few years, particularly during Covid, with excessive fiscal and monetary stimuli in the economy and record low-skilled migration levels.
We're probably at a point where the parasite can only survive by killing off the host.
Ummm maybe this.
https://www.rnz.co.nz/news/business/537075/nz-ranks-low-in-global-econo…
Just keep doing what we're doing, we will reach the bottom.
Many renowned economists argue a nation's current account balance is a lagging indicator of its economic competitiveness.
Ours has been stuck above 6% for the last 4 years, which many bank economists were asserting we would quickly claw ourselves out of post-Covid. We currently rank worse than Benin, Mali, Togo and Yemen on current account balance.
The economy is linked to debt issuance by private banks, and our willingness and ability to spend it into the economy. Structurally flawed.
And it's linked to the flow of already printed money, currently stored in financial assets at the top, to flow down to the bottom and spent into the economy. But most of it's numbers on a screen, requiring more debt and demanding more returns. Structurally flawed.
There's a circular flow of currency required, not debt issuance and storing.
A financial crisis was backed in to be honest (in my opinion). And it has been since about 2015 from keeping interest rates too low for too long. It was about to happen in 2020 (see the yield curve inversion that occurred in 2019) but was masked by covid and the insane fiscal and monetary policy intervention that occurred then - now it could be a real cracker as we’ve essentially gone from 2008 to now without a proper recession - thus has two economic cycles concentrated into one.
The yield curve the last 2 years has been saying something big was probably in the pipeline - I mean it’s been the biggest/deepest/longest yield curve inversion since the late 1920s and that caused the 1929 crash and subsequent depression. Will a repeat occur - probably not because central banks/governments will probably overdo their stimulus again to avoid it but the result will be we amplify the issues we already have - ie they will create more the problem - too much debt relative to productivity. Rich get richer. Young people don’t buy houses. Don’t marry and have kids. We import more of the 3rd world to keep population growth alive. Living standards deteriorate. But at least we avoid a technical recession/depression - even though everything gets worse in terms of quality of life for the average person in society compared to 20 or 30 years ago.
"A financial crisis was backed in to be honest (in my opinion). And it has been since about 2015 from keeping interest rates too low for too long."
Low interest rates weren't the problem in and of themselves. The problem was where the new money created by banks went ... i.e. far too much went in bidding up existing asset prices while sweet f.a. went into new stuff.
No DTIs in 2015. The RBNZ has a DTI now. They better start using it tout de suite ... before the situation gets out of control !!!
(And it will get out of control real fast if FB property 'investor' pages are anything to go by.)
"and now believes"
This doesn't instill me with confidence. So all commentary has been based on incorrect data and even now it by no means sounds certain as to what the actual position was/is.
The question we should be asking is why is the data revised significantly more than 2 years after the fact? It reeks of incompetence, or a political agenda, if you ask me.
agree
But issue identified (although cause not agreed) what are the solutions as tinkering wont cut it
What is going to give me confidence to invest in productive business here in NZ? - because if there is no change my money is heading offshore - in the same way that the skills currently are
"1.1% in June, revised downward from -0.2% as at the original time of the data release."
What value does Stats NZ add at this point when they can't even measure GDP to the nearest percent? I mean we're making monetary and fiscal policy decision on this data, surely there has to be some level of accountability!
Or we do something like Japan and spend the next 30 years with no local population growth, fighting deflation, have to import the 3rd world to keep the population stable, asset prices are flat or falling for years as dropping rates just creates even more deflation.
Dan you might need to find someone to do some 2025 policy predictions as my take is that NZ is on track for another year exactly the same as 2024 given the current policy/leadership positions
With the risk to the downside given global uncertainities especially key political ones
Yip the solution to this is going to be a big fiscal spending program but that would cause massive egg on face for Luxon and Willis which will probably be too painful for them to face. So as you say it could take 12 month of pain before they accept/realise their economic plans are going to be a disaster that causes widespread suffering and the loss of the next election.
Our government/debt levels to GDP aren’t they problem - but our private debt to GDP levels are. Just dropping rates to grow private debt to GDP back up to their limits which for us seems to be about 160% isn’t going to resolve anything - it will just cause more of the decay we’ve seen the past decade or more.
No. The solution is a massive overhaul of our tax system.
A "big fiscal spending program" like you suggest, before a tax system overhaul, will simply repeat the problems of the past. I.e. some will end up in the right places but most will end up in the wrong places. Or put another way, our tax system encourages all the wrong places.
For political reasons this Government gave everbody tax cuts, then borrowed to pay for it.
Not much better than the last lot.
They seem to be pandering to lobbyists and politcal donors to the detriment of most NZers.
Money should be chanelled to productive enterprises, not housing.
No country ever became rich by buying and selling houses to each other at a higher and higher price
which has been encouraged by this and previous governments through tax incentives.
https://www.stats.govt.nz/news/gdp-decreases-1-0-percent-in-the-septemb…
GDP per capita fell 1.2 percent during the September 2024 quarter. This was the eighth consecutive fall in the series.
Orr is now between a rock and a hard place. He can't keep the OCR too high as the economy will crater but on the other hand if he drops the OCR a lot the currency will crater and inflation explode. This will also kill any tiny bit of confidence gained from the cuts over the last few months.
Either way no good going forward.
I haven't seen a great deal of problem solving in the comments so far. As far as I can see from a technocratic point of view the solutions are fairly straightforward.
Dairy prices are rising, China is in a holding pattern rather than collapsing - this is somewhat good news for our exports. The fiscal downdraft is coming from the govt and the RB's contractionary interest rates.
The govt needs to get together with the Reserve Bank and agree to increase govt spending and reduce the interest rate. They should do this quickly.
Act should go along with this in exchange for making a meaningful change to the way local govt works.
Part of the increase in govt spending should be to subsidise local govt infrastructure spending which is badly needed, but the quid pro quo needs to be a reduction the council paperwork and a reduction in the costs of getting anything done.
The RMA has gone way beyond letting the neighbours and the iwi have a say in the development next door and has become a method of extracting money from people trying to do something to the point where most developments are unviable without very low interest rates and very high property prices.
You can't unwind that sort of system suddenly without causing permanent economic damage and long lasting scars. So you have to do it gradually with the state cushioning the blows.
It is easier to bring in a capital gains tax or a wealth tax but this means that middle class wealth is destroyed, the 1% get even richer (because they have the resources to avoid the wealth tax) and increases in productivity are very hard to achieve while the local bureaucracy still is allowed to have such a stranglehold on economic actors.
The problem solving is structural change in our economy. Away from rentier behaviour (that requires tax changes). Away from property speculation (also tax changes and rules governing financial institutions). Concentrating on growing productive enterprises (thats changing tax systems and significantly increasing R&D grants, startup funding etc etc). Investments in infrastructure, in a huge way, knowing that infra will never be cheaper to build than right now AND it is a catalyst to smooth all of the above.
But all of that requires long term planning, thinking and political cycles to encourage long term thinking. No government wants that, they are only after "quick wins". If they did what the above, they would have been doing it for the last 30-40 years and we would be a far more prosperous nation. Instead the short term thinking is bringing us to our knees.
Yep - the data release is good news, now a .75 cut in Feb will be favourite in the betting markets.
"You know that big interest rate cuts arent a good sign??"
Yeah, we know. We have been living through the bad for the last year you donkey.
Finally the infection will get some penicillin now that the blood test results are in.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.