Finance Minister Bill English yesterday continued to talk up
the prospects of an economic recovery despite evidence the
recovery stalled in the middle part of this year.
Gross domestic product (GDP) was much weaker than expected in
the three months ended September, contracting 0.2%.
In addition, growth in the March quarter was revised lower to
0.1% from 0.2%.
The country missed a double-dip recession by a whisker.
Two quarters of negative economic activity is the official
description of a recession.
GDP measures the output produced in an economy during a
However, Mr English said the one-off effects of the
Canterbury earthquake and snow storms in Southland also
showed through in the September quarter.
"Before this result, we had seen five consecutive quarters of
growth since coming out of a deep recession. I've said all
along that this recovery would be a bit bumpy at times, and
that's proved to be the case.
"Having said that, I'm actually quite confident that the
economy will build momentum in 2011 and beyond."
Mr English placed his hopes for the economy on declining
unemployment, strong export prices and New Zealand's hosting
the Rugby World Cup.
It was important to look through the quarter-to-quarter
figures and focus on the long-term challenge of building a
sustainable recovery on savings and exports rather than
borrowing and consumption, he said.
ASB economist Jane Turner said the GDP result was much weaker
than the market and the Reserve Bank were expecting.
The weakness was a result of weak housing demand and
activity, poor weather conditions and a decline in
"We expect that both manufacturing activity and housing
construction will recover over the next year. Weather
conditions present an ongoing challenge to New Zealand
There remained some signs that underlying demand might not be
quite as weak as the figures suggested, she said.
Business confidence had recovered from its mid-year dip, and
the strength of capital imports pointed to an increase in
The strength seen in transport and wholesale activity was not
consistent with an economy going sideways, Ms Turner said.
The activity related to the preparation and hosting of the
world cup next year was another reason to expect better and
brighter things for 2011.
"Nonetheless, with a negative GDP number proving a
disappointment ahead of Christmas, the Reserve Bank will
certainly be in no hurry to resume lifting the cash rate
until it is very confident that the economic recovery has
The Reserve Bank was not expected to lift the official cash
rate until June next year and rate hikes were expected to be
"very gradual", she said.