"The economy has now grown in 10 of the past 11 quarters, since emerging from the recession which started in New Zealand in early 2008," said English said.
"The December quarter was challenging, as the economy continued to rebalance, with households saving a bit more and being careful with their spending. In addition, conditions were tough around the world, particularly in Europe"
English said today's data "included signs that the economy is benefiting from an increase in net exports and investment, which will help New Zealand over the long-term.
He said the New Zealand economy would continue to expand this year and there were "a number opportunities that will provide impetus for solid growth over the next three years."
"The rebuilding of Christchurch will help drive domestic activity and our two largest trading partners, Australia and China, are forecast to maintain relatively high growth rates. In addition, our terms of trade will remain elevated on the back of demand for our major export commodities from emerging markets." said English.
National accounts manager Rachael Milicich said growth during the quarter was driven by good growing conditions for agriculture, more business services, and spending on the Rugby World Cup.
"Weaker manufacturing compared with last quarter dragged the overall result down," said Milicich.
A recent Reuters survey of 11 economists expecting GDP to have grown 0.6 per cent, slowing from a pace of 0.8 per cent three months earlier.
That would have pushed annual average growth up from 1.3 to 1.6 per cent. The Reserve Bank was also looking for 0.6 per cent.
"GDP was weaker than market expectations. It showed mixed rates of sector performance, with activity underpinned by good climatic conditions, the tail end of the Rugby World Cup and signs that the construction sector has turned the corner," said the ANZ Bank in a statement.
"Elsewhere activity was weaker, with signs the recovery did not gain traction in Q4. We expect further slow rates of growth in the first half of 2012 as structural imperatives and a post Rugby World Cup lull temper the usual cyclical rebound."
The bank's economists said they "continue to look for a December 2012 start to the tightening cycle," of the Reserve Bank, but stressed this was based on an assumption that economic momentum in the NZ economy would pick up in the second half of this year.
"At first blush, we regard this as a slight downside surprise, but it doesn't alter our overall impression of the economy," said Westpac Bank economist Dominick Stephens.
Evidence on the Christchurch rebuild was mixed. Investment in buildings, both residential and non-residential, was up sharply, he said.
"However, it seems much of this investment went into service categories. On the production accounts, hard construction activity was up only 1.5 per cent, less than expected."
- HERALD ONLINE / BUSINESSDESK