By Bernard Hickey
New Zealand's Gross Domestic Product rose 0.9% in the June quarter from the March quarter, driven mostly by strong construction activity and household consumption growth.
Annual growth of 3.6% included the effects of population growth 2.0% for the year, leading to per-capita GDP growth of 0.7% for the year, the slowest growth in a June year in five years.
The result was slightly below economists' forecasts for growth of around 1.1% for the quarter and included a 1.7% fall in spending by overseas tourists. The per capita growth was in line with expectations. The New Zealand dollar dropped around 20 basis points to 72.8 USc after the result.
The number was also bolstered by a 7.6% increase in goods exports, although Statistics New Zealand cautioned that it was driven partly by a run-down in inventories built up during the March quarter. Construction grew 5.0% in the quarter, while household consumption grew 1.9%. Gross Domestic Expenditure for the quarter was 1.2% and ran ahead of production growth of 0.9%.
GDP was 3.6% higher in the June quarter than a year ago and real per capita GDP grew 0.5% in the quarter and was up 0.7% from a year ago. The GDP growth of 0.9% in the March quarter was revised up from 0.7%. Growth for the full year to June from a year ago was 2.8%, while GDP per capita growth for the full year was 0.7%.
Real Gross National Disposable Income per capita, which takes into account the purchasing power of output given New Zealand's Terms of Trade, fell 0.1% in the June quarter, although it rose a revised 1.5% in the March quarter. Over the full year RGNI per capita rose 0.5%.
Economist reaction
Economists said the result for the June quarter was a touch below expectations, driven partly by the surprise fall in tourism spending, but was offset by the revision higher for the March quarter.
"All up, annual growth is materially higher than the RBNZ believed at the August MPS," ASB's Nick Tuffley said.
"On balance, this may create some reluctance from the RBNZ to cut the OCR below 1.75% next year - after delivering one more cut in November," he said.
"Nonetheless, in light of continued weak inflation, and despite strong growth, we continue see a high chance of a further cut next year should inflation indicators continue to print on the weak side. We also expect the RBNZ will cut the OCR to 1.75% in November."
Tuffley said the lift in per capita GDP was very positive.
"We believe that the underlying momentum in NZ growth lifted firmly over H1 2016 and could even be stronger than the Q2 GDP figures suggest," he said.
"While all this very encouraging, we continue to expect further rate cuts as the lack of inflation remains the key focus for the RBNZ at this time."
Westpac's Michael Gordon said the data changed little for the Reserve Bank.
"Despite the slightly softer headline GDP growth figure, upward revisions to Q1 mean there is little in today’s data to change our view on the likely timing of RBNZ rate cuts," he said.
"Estimates of capacity pressure (and therefore inflation) are likely to be broadly in line with expectations following today's data," he said.
(Updated with more detail, reaction)
66 Comments
No Nymad - I think I pretty much nailed it. People who look at the / capita rate might disagree with Mike''s waltzing comment below.
"Annual growth of 3.6% included the effects of population growth 2.0% for the year, leading to per-capita GDP growth of 0.7% for the year, the slowest growth in a June year in five years."
Whilst I appreciate that the naysayers with an agenda will want to pick holes in any good news out there, but if you're going to go down the migration and growth per capita route please at least acknowledge that NZ isn't the only country with large immigration going on, yet those that have like the UK and Germany are growing at less than half the rate of NZ. Please present some logical explanation for that or otherwise perhaps find some other real arguments that might best push the political agenda better.
Comparing UK and Germany's immigration rate with NZ is laughable. We have about 10x the rate of per capita net migration as either of them. https://en.wikipedia.org/wiki/List_of_countries_by_net_migration_rate
Yes I had googled that before I posted, some stats but not necessarily facts about the question. So if we're stating that migration is the major issue and a problem, then we're saying we don't want to look anything like Qatar, Singapore, Luxembourg, Bahrain and all the other countries with double digit plus migration stats per capita - I'm pretty comfortable with those comparisons even although they are pretty pointless as many will pick holes in those countries as indeed we all would with Southern Sudan who also fits the bill. The point is picking on net migration as some form of argument against a strong GDP number is indeed pointless.
Grant A,
re your last sentence; it not at all pointless to assess GDP growth on a per capita as well as a nominal basis. I am happy to accept that our GDP growth rate is significantly better than many other countries are currently achieving and that's good.I hold shares in Auckland Airport, Tourism Holdings,Scales and Seeka and can see that growth reflected in their performance. However, what the per capita figure shows us all too clearly,is that overall,we are not achieving productivity growth and in the long run, that is what we need to grow wealthier as a country.
We have a very high immigration rate. We are fourth highest in the world according to Wikipedia. Immigration adds to GDP, that is a fact. That is why others were bringing it up. Some might say we do not need such high immigration when we are struggling to house people (in Auckland especially) already. Others would say the Government is keeping immigration high to stimulate the economy regardless of whether it is a net positive for the existing population.
Immigration is an extremely blunt instrument to provide for "growth" and unfortunately as things are, it is the only thing the human race can come up with, to kid ourselves we are doing well. Once there is too much competition for resources we start killing each other, so that when we are finished with that, we can start the whole "growth" thing all over again. With so much that we are able to do well, you think we could sort that BS wouldn't you?
It has a hell of a lot to do with providing the expertise and labour required to generate the tax income to provide the social services that we all expect. Many of ther busineses I deal with across the likes of the medical profession, IT and even apple growers in Nelson, are all struggling even now to get what they need to maintain let alone grow their businesses (or provide the services expected)
Government must only be praying that the bubble does not burst before next election unless they believe that house price will always keep on going up (height of optimisim)
Outside view about NZ Economy in Newshub
http://www.newshub.co.nz/business/nz-economy-hugely-imbalanced-as-gdp-g…
Ann Pettifor was also on Willie and Ali's political hour ( 2-3 p.m. ) on Radio Live ...
... sometimes it takes an outsider to give you their view , looking in ... a fresh perspective ...
And she's saying , you lot are on borrowed time ... that housing bubble is going to crush you under it's weight of debt , once the crash rumbles down the hill 'like an avalanche ... and all your equity is wiped out , vanished ... but the debt remains ....
lol, lol, lol, so is that the fresh perspective ??? or you guys like to have some support from outside to throw in any negativity into a Good News ...
This Lady is such an ..... !!
Who is she to judge what NZ is or not doing and what NZ should do?
Who is she accusing the NZ Govt of sitting on its hands ... ??
If you pay attention to the last few minutes of the interview you cannot miss the Left political tone in her excitement .. as she refuses to even listen to Paul ..lol. she tried miserably to sound that she was the Angel from "Outside" to save this poorly imbalanced sinful country that is surely heading to the burning Hell !!!
I doubt that she has any clue of what is really being cooked in the USA ... she is a Doomsdays caller according to textbook theories and traditional remedies hoping she will be right one day !...
she is one of the those who forgets ( and don't want to listen to ) that the world's economic new solutions are being rewritten at the moment and the assumption of paying debt the next day the world defaults is being prevented and revised to avoid crashes of any sort .... ALL tools and levers are in use and nothing is left out to stir this global issue !! its not just NZ.
That $2 B loss in the market was because of deliberate announcement by a FED Governor to prop up the US dollar that was sliding too fast to the FEDs liking and allowing the price of Oil to escalate last week ... the market recovered most of that the next day ...and some bankers and hedge funds made a nice coin out of it ... so she is one of those who try to cite any example to prove a point and downplay any positive that emerges to support her theory ....
I hear this kind of absurdity from so many US commentators everyday .... while reputable ones explain what and how the new game in the world is shaping up ...
Don't be fooled NZ, open your minds and check out every bit of info and opinion before you judge ...
Many straight head economists like these ..... will try to add to this list as I go,
But here is are few bright cookies with very bright CVs to go with:
Mohamed A. El-Erian : http://www.cnbc.com/2016/09/13/fed-should-get-rate-hike-over-and-done-w…
Nouriel Roubini: https://www.roubini.com/
Interesting that you picked a Keynesian economist in Roubini, given your typical opinions on politics and monetary policy..
Plus you do realise what El-Erian is saying isn't that far detracted from the article cited above, right?
"Central banks cannot be the only game in town. They cannot compensate for other policymakers. There are much better tools on the fiscal side and on the structural reform side that are much better suited for what's needed."
Although not quoted for the NZ context, it sounds pretty damn similar to the root issues we are seeing in NZ - wouldn't you agree?
I Absolutely do ... , and please see my comments below to Kiwidave... My point in my comment was that we need to separate between the fluid world economy and suspicious politics.
El-Erian has extensive and very pragmatic views on economy ( not just the above article which was on hand) he doesn't mince his words and is an unbiased professional.Considered a world authority and was the head of Obama's economic group - very widely read.
This small extract from an interview with Marc Faber might also touch closely on the subject and provide yet another view:
Epoch Times: How long can the central banks manipulate markets?
Mr. Marc Faber: This is an issue that will be decided by central bankers and I don’t have control over the manipulation of central banks. Haruhiko Kuroda of the Bank of Japan (BoJ) expressed the view that there is no limit to monetary inflation. That they can keep on buying assets and they can keep on buying equities and real estate.
So the madness in the present time may go on. In a manipulated market, it won’t end well, but you don’t know when it will not end well, and how far the manipulation can last."
the full article is here: ( well worth reading)
http://www.theepochtimes.com/n3/2153748-dr-marc-faber-dow-could-go-to-1…
Of course we should be looking at a range of opinions and sources of information. Unlike you I am not persuaded that governments and central banks really know what they are doing. A lot of their actions are based on unproven theories with so much that is entirely without precedent wherever you look - the lowest interest rates in 5,000 years of monetary history for a start. It really feels like we are caught in a global economic experiment with monumental consequences. Assume nothing.
Agreed Kiwidave, me neither and I am sure that they don't know what they are doing ... just like everyone else!,
I also agree that we are caught in a global economic experiment and everyone is experimenting and planning on very short term basis in this fluid economy because of the combination of slow growth and low IR that doesn't seem to be going away soon.
The other problem are the tough geopolitical balances that are needed to be held regardless ( like oil pricing, and trade sanctions etc)
That is the new world economy today and there lies some contradictions with textbook processes. That is what I meant by the world is Shaping up and all tools and levers are being used.
What I hate is that: given this huge storm that is affecting everyone (global economy), some come out and try to make a political stance out it and throw around blames and mud while being completely oblivious of the facts that more and more domestic political decisions are being dictated ( or at least hugely affected) by the state of this "Storm" and that Govts and central banks do not have the total liberty in pulling their own levers.
Almost everyone who is involved in this is saying simply { We don't Know } , we are working on it and tweaking as we go ... ask us in a year.
One last example about this : 3 weeks ago, tons of oil and market analysts were saying that Oil prices will pickup going forward to the end of the year and the price range in 2017 should be in the range $50 - $55 a barrel for the WTI and there were so many hedge fund and money managers pricing that for their clients for future investments....
just yesterday all turned to custard and the new consensus is for a much lower price of 40 - 45 range throughout the next 18 months ... that just tells you that one string of data or new inventory stock-take or new rig count and cost can change huge plans so does a political decision here or there as if the whole world is sitting on an a very wobbly edge that can be tipped over with a small bit of news.
Welcome back Nat Birds - I missed your commentary on JK pooing his pants a couple of days ago over his "3% only" foreign buyers being affected by a tax - perhaps one of you would like to play catch up here.
(Frankly the article disappeared very quickly from Interests lists - a fact that was picked up by other posters but if you wish to review it see below. )
http://www.interest.co.nz/news/83557/pm-says-wary-policy-action-could-c…
Ham n eggs - interesting statement. Can you please quote me the relevent Govt debt ratio as a percentage of GDP ( and the current fiscal surpluses or deficits) of NZ against USA, Japan, Germany, Australia, you can name a few others, and then tell me if it's something to be proud of or ashamed of - or is that fact that you have no idea about, or detail that you'd rather not make public to those that might take your statement at face value when in fact it's worth zero.
I see I appear to have touched the nerve of a true believer ...so that makes it more difficult to explain where this is heading, , but simply put, you might want to contemplate what underwrites all these new debt claims... and whether escalating a ponzi is actually good leadership.
Grant A,
Hamn eggs is probably referring to growth in private sector debt . If so... then I would agree with him...
ie.. GDP growth , thru credit growth.
Which is not to say it is not Real growth..... True/real growth is mostly a function of Hard work and productivity.....
The credit growth can only go to 3 places:
1/Consumption
2/Investment
3/Speculation..
You tell me where NZ private sector is spending its debt..???
Bet he wasn't Roelof but let's give him the benefit of the doubt. Yup private debt is160% plus of income, one of the highest in the world, and yes no doubt going mostly into housing ...but why's that ? QE and too low interests rates that other countries seem to think is all that will hold them together, are forcing us into too low interest rates (unless you're happy to destroy your productive sector with a high currency), and accordingly massive rise in house prices, such that higher debt levels are forced upon those that desire home ownership. It is a ponzi scheme globally that will not end well, but will end when the trigger comes, ignoring the current supply/demand equation)
if per capita GDP growth is only 0.7% pa, that means the rest of the growth, to get to 3.7% is from population. This to me points to a serious problem, too high population growth at a time of the worst housing crisis in NZ history. Wish the media would call out this "growth' for what it really is
I think most of the people thinking immigration is too high were probably the same people complaining about the brain drain of 40,000-50,000 Kiwis moving to Australia every single year after the GFC years ago.
New Zealand's annual population growth rate has been over 2% only 5 different times since 1960. NZ's population declined in 1979 (-0.4%) & stagnant in 1986 (0.0%).
Australia's population growth rate went below 1% only once which was its lowest since 1960 which was in 2003 & went as high as 3.4% in 1971.
If the government is able to manipulate till next year - good for them but more chances of it going burst by next year and unfortunately will be near election. It would have been in national interest to control it now instead of letting it run amok and crashing just before election.
Mentioning that price will rise and again the reason mentioned is Chinese.
Is it not clear that too support the current housing bubble Chinese are and have to play a BIG role.
http://www.stuff.co.nz/business/84322204/all-predictions-of-an-auckland…
Everyon knows but still denial and getting away with lie but for how long.
Shame.
KeyWest, I do read his reports. Tony is BNZ's chief economist. He is an employee and is therefore not independent despite what you may think.
I read this week's report and it had the following section " 19 reasons why Auckland house prices would keep rising."
What he failed to mention was that
1. NZ has the lowest purchase tax in the world. Singapore, Vancouver & Australia now tax foreign buyers and NZ doesn't.
2. NZ media & govt does not correctly classify foreign buyers to include students & temp visa workers and these two groups make up 30% of resident sales.
Banks and journalists with expensive properties in Auckland dare not discuss
i. Vancouver Tax in a favourable manner.
ii. the correct classification of foreign buyers to include students and temp workers as Canada and Australia do.
Wow, the economy is doing so well. Good work John Key. Keep the immigrants coming. Looking forward to house prices doubling again over the next 10 years, but probably not as much as property investing politicians as I only have a couple of properties. Have been a bit slow on the up take, but this is a one way ride which isn't going to end in my lifetime.
Wow, the economy is doing so well. Good work John Key. Keep the immigrants coming. Looking forward to house prices doubling again over the next 10 years, but probably not as much as property investing politicians as I only have a couple of properties. Have been a bit slow on the up take, but this is a one way ride which isn't going to end in my lifetime.
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