Finance Minister Bill English is optimistic about economic growth after statistics today showed the country avoided a double-dip recession but Labour says the economy is going nowhere and the Government has no idea what to do about it.
Gross domestic product rose 0.2 percent in the December quarter following a decline of 0.2 percent in the three months to September, according to Statistics New Zealand figures.
A 2.5 percent rebound in manufacturing during the December quarter was mostly offset by falls in other parts of the economy.
Mr English said the figures confirmed the economy was subdued in the second half of last year but there were reasons to be optimistic about the outlook in the coming year.
Annual growth last year was 1.5 percent - the highest for more than two years - and the economy had expanded in six of the past seven quarters.
"The economy is making the adjustment it needs to - away from excessive borrowing and housing speculation and towards more savings and debt repayment," Mr English said.
"In the short term, this is constraining growth, particularly in domestic sectors like housing and retailing.
"But looking ahead, there are reasons to be optimistic about growth picking up later this year - despite the devastation and considerable disruption of the second earthquake in Christchurch last month."
Prime Minister John Key said the figures were close to expectations, with a flat second half of the year consistent with other countries worldwide.
"We all know that New Zealand needs to do better and I think without the earthquake in Christchurch we were on track to do a lot better in 2011," he said.
The quake would impact growth rates for the first half of this year but the Government was committed to doing everything it could to lift growth.
"If ever there was a time for the Government to be very careful with its spending it's now, it's consistent with what we're seeing in other countries around the world and I think in the end all New Zealanders have inherited this quake."
Labour finance spokesman David Cunliffe said the figures showed the economy was going nowhere because the Government had no plan.
"Bill English is presiding over an old-fashioned slump, and clearly has no idea what to do about it," he said.
Mr Cunliffe noted that Mr English indicated last week that debt would be used to pay for the cost of the Christchurch earthquake, while Mr Key this week said spending cuts in this year's budget would help pay for the rebuilding effort.
"Budget cuts in the middle of a deep recession will only put more people out of work, undermine confidence, reduce demand and drive down tax flows," Mr Cunliffe said.
"This isn't a plan. It's a recipe for continuing economic failure."
Mr English said yesterday the Government would face the biggest budget deficit in New Zealand's history at the end of the current financial year.
The Government needed to play its part in re-balancing the books by getting its finances in order and returning to budget surplus.
Council of Trade Unions economist Bill Rosenberg said the sluggish economy, despite record high commodity prices, suggested government stimulus measures were not well directed.
He also challenged claims the subdued results were due to people paying off debt.
"Any repaying is most likely being done by high-income households - using tax cuts which have increased the government's debt. Low-income households are just finding life very hard."
