Bernard Hickey: Labour's policies took us to Helen back

The 'stronger for longer' economic growth bragged about by Helen Clark and Michael Cullen was a fraud. Photo / Richard Robinson

Economic growth and debt figures out this week were sobering for a couple of reasons.

Firstly, our economic output in the June quarter grew just 0.2 per cent, which was lower than the March quarter's 0.5 per cent and much lower than the 0.8 per cent forecasted growth.

This was bad enough in the short term and raises the risk of two consecutively weak quarters, given the Christchurch earthquake will hammer growth in the September quarter.

Consumers are now repaying the debt built up over the past decade, strangling the retailing sector and casting a deathly pall over the housing market.

Manufacturing output fell 4 per cent as exporters struggle with a high dollar and patchy demand from customers globally. The Northland drought was a factor too. The Reserve Bank is now expected to keep the official cash rate on hold at 3 per cent until March 10 at the earliest.

But second, this week's figures show the long-term impact of the recession and economic boom that happened before that. They demonstrate that all we have to show after six years of boom and bust is an extra $97.5 billion in debt.

BNZ Economist Stephen Toplis compiled some figures showing New Zealand's GDP is still 1.5 per cent below its previous peak in late 2007 and is down 4.2 per cent on a per capita basis from the peak because of the migration and natural population growth we've had recently.

This is the truly shocking result from the recession and the debt-fuelled growth that preceded it. Per capita GDP in New Zealand is now back at the levels it was at in the June quarter of 2004.

Think about that for a moment. The "stronger for longer" economic growth bragged about by Helen Clark and Michael Cullen from 2000 to 2008 was a fraud.

It was growth built on debt and now New Zealanders are having to consolidate and repay that debt, and doing it on lower incomes.

After the housing boom and years of spending, New Zealanders have seen their per capita GDP fall, but total debt rise $97.5 billion to $246.5 billion in the last six years.

No wonder this recovery feels more like a hangover.

And this isn't just because of inflation or because we've invested heavily overseas.

Our net international investment position, which includes debt and equity owned and owed by New Zealanders here and overseas, deteriorated by $55.4 billion to a deficit of $163.7 billion.

Household debt as a percentage of disposable income rose to 154 per cent from 127.5 per cent in that six-year period.

So what was the point? Now we produce less per person than we did in 2004. And now we have to repay a much bigger debt.

It wasn't even a wasted six years. We went backwards.