Finance Minister Grant Robertson is fronting on Newstalk ZB after fresh data shows the economy is slowing.
The economy contracted 0.6 per cent in the December quarter, raising the likelihood New Zealand is already in a technical recession.
The worse-than-expected data, in combination with the fall-out from the global banking crisis, yesterday prompted markets and economists to cut their expectations for rate hikes next month.
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Asked if we were in a recession, Robertson said that would only be known when they get the numbers back for the March quarter.
“But obviously, people can see that the economy has started slowing. And clearly, all the weather events that we’ve had in the first part of the year won’t have helped that.”
Speaking to Newstalk ZB’s Mike Hosking, he said they would “wait and see”, but acknowledged that there had been softening to the economy.
Robertson said the situation we are going through is a part of the overall post-Covid hangover that other countries are experiencing also.
“I stand by the decisions that we’ve made. I think we helped New Zealand get through Covid in a way that saved lives [and] saved businesses.
“We, as a Government, are reducing our spending over the next few years.
”I think we’re doing our bit to get the balance right here. But when you’re dealing with a pandemic, there will always be some consequences.”
Put to him that other countries around the world have indicated they are not in a recession, including Britain, Robertson said each country’s circumstances were different.
Nine of 16 industries experienced a decrease in activity compared with the September 2022 quarter.
Manufacturing was the biggest driver of the decrease, down 1.9 per cent.
“A fall in transport equipment, machinery, and equipment manufacturing corresponded to lower investment in plant, machinery, and equipment, while reduced output in food, beverage, and tobacco manufacturing was reflected in a drop in dairy and meat exports,” Ruvani Ratnayake of Stats NZ said yesterday.
Household spending was flat, as decreased spending on durables, including audiovisual equipment and furnishings, was offset by increased household spending on services.
The quarterly figure was substantially worse than major bank economists anticipated. Two consecutive quarters of negative growth is a widely-used measure of recession.
ASB economists responded yesterday by cutting their interest rate call, saying they expect the Reserve Bank to hike by just 25 basis points in April, rather than 50.
Capital Economics in Sydney said it expected the RBNZ will cut rates by year-end as the recession takes hold.
The GDP fall follows a rise of 1.7 per cent in the September 2022 quarter and takes annual GDP growth to 2.4 per cent over the year ended December 2022, compared with the year ended December 2021.
National finance spokesperson Nicola Willis noted that - excluding Covid-19 lockdowns - it was the weakest quarterly growth since the Global Financial Crisis.
“A stalling economy is yet more bad news for New Zealanders already battling sky-high inflation and rapidly rising interest rates,” she said.
Earlier, ASB had forecast a 0.5 per cent slump, saying an element of payback was likely following the “whopper” 2 per cent lift in the third quarter.
“GDP data is hugely backwards-looking at the best of times, but that’s doubly the case this time around given the impact of Auckland flooding and then Cyclone Gabrielle in January and February,” ASB senior economist Nathaniel Keall said earlier.
For too long, ‘accident’ has been a blanket term that absolves responsibility.