NZ Herald business editor at large Liam Dann explains how the country's GDP shrank by a record 12.2 per cent in the June quarter. Video / Will Trafford
COMMENT:
Perhaps the weirdest thing about the Covid-19 recession - the deepest in New Zealand history - is that it is already over.
How was it for you?
GDP data is always backward looking but the speed at which this crisis is moving makes it particularly difficult to gauge howwe are really doing right now.
According to Finance Minister Grant Robertson we are doing better than expected.
Measured against yesterday's figure - a 12.2 per cent second-quarter contraction - things look pretty good.
In fact all the short-term economic data - from retail sales to unemployment - has been revised progressively upwards since those first dark days of the pandemic.
The economy has proved to be genuinely more resilient than economists first thought - although to be fair there was no precedent to benchmark this kind of event against.
But how long can we frame our economic progress against dire forecasts made as the world was coming to terms with the historic scale of Covid-19?
Meanwhile National Party leader Judith Collins says the latest GDP figures are devastating and show we are in bad shape.
This is true too.
There's no question this is the biggest contraction in economic activity New Zealand has ever seen.
It is much bigger than the 7 per cent June quarter slump in Australia.
We are already nearing the end of the third economic quarter.
Economists forecast that this current quarter will show the biggest increase in GDP that New Zealand has ever seen - perhaps as much as a 13 per cent spike.
According to Finance Minister Grant Robertson we are doing better than expected. Photo / Mark Mitchell
Looking at that rebound in isolation as a sign of underlying economic strength would be absurd.
Which should be a reminder that doing so with the second-quarter GDP number is too.
We can't look at one without considering the other.
They are inextricably linked by the artificial policy measures that define them - the Yin of lockdown and border closure to the Yang of fiscal and monetary policy stimulus.
We'll need to let both play through before we have an accurate measure of our underlying economic health.
The worst symptoms of this recession will likely be felt when, in technical terms, it is already long gone.
The statistics that really matter to our lives - things like unemployment, business failures, mortgage defaults - are likely to peak next year.
The social costs will take even longer to emerge.
Many economists are looking through the noise of quarterly GDP for now.
They argue that our success will be best measured in the time it takes to get the economy back to the baseline of GDP, as it was at the end of 2019 just prior to the pandemic.
The timeframe for that looks out into 2022 or even 2023, although much is still dependent on the control and treatment of the virus itself.
All we can be sure of for now is that have a long, hard recovery ahead of us however good bad or ugly the current data looks.
