September 17, 2025 • 10 mins
Our economy's been shrinking much faster than economists thought.
Latest data just out from Stats NZ shows GDP fell 0.9% in the three months to June.
That follows six months of growth, after six months of contraction.
Infometrics Chief Forecaster Gareth Kiernan told Kerre Woodham it's far worse than any economists were expecting.
He says this number is completely "off the charts", as far as they're concerned.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
You're listening to the Kerry Wood and Morning's podcast from
News Talks, he'd b as.
Speaker 2 (00:12):
You heard New Zealand's economy is back in contraction, probably
felt like it while it felt like it because it
was later started. Just up from stats n Z shows
GDP fell zero point nine percent in the three months
to June. That follows six months of growth after six
months of contraction, and it's a reduction well over market
(00:32):
expectations and for Metrics Chief forecaster Gareth Kennan joins me,
good morning.
Speaker 3 (00:37):
To you, Morning Carry.
Speaker 2 (00:40):
Did you predict this? I was just trying to have
a look back through the through the emails and the
news stories.
Speaker 3 (00:47):
We were at the bottom end of market expectations, but
we're affecting a zero point five percent contraction, so that was,
you know, right off the bottom of the chart. As
far as we concerned.
Speaker 2 (00:58):
This is not good news for the government.
Speaker 3 (01:02):
No, given that they've really sort of nailed their colors
to the MTAM getting better through the course of this year.
It is making that position for them particularly difficult to
cling to. And you know they've talked a lot about
getting more infrastructure going and more spending going by the
end of this year and into twenty twenty six, and
(01:22):
certainly the sort of the international wins we're being buffeted
by the sort of lack of domestic recovery that we're
seeing so far does mean that, you know, the onus
really is on some of that to come through, perhaps
if they are looking for a better economic performance before
the election next.
Speaker 2 (01:37):
Year, and that was worth the dairy sector doing well,
you know.
Speaker 3 (01:43):
Yeah, And look, I mean you look at those dairy prices,
you look at meat prices. They have been good. Dairy
production volumes have been okay, although the export numbers in
today's data weren't quite as positive as we might have hoped.
But on the meat side, I mean, you look at
meat production volumes, meat exports, they are under a lot
of pressure. And so look, the price could be a
(02:05):
million dollars for your sheep that you're selling, but if
you don't actually have any sheep to sell, then you're
not going to be making a lot of money. So
I think there is sort of you know, mixed messages
we are getting through there. We've talked about the need
for a bit of patience in terms of that sort
of provincial recovery. We're seeing a little bit of it
in some of the numbers that we get through from
different parts of the country where particularly through the South Island.
(02:27):
I think that sort of agricultural lead recovery is showing
through a bit, but you know, there are still some
obstacles to overcome, and we know that farmers do tend
to be pretty cautious with their spending. You know, they'll
be paying down debt, shoring up their cash position before
they really think about, well, you know, do I need
to spend more on fertilizer or deferred maintenance or a
(02:49):
new use or tractor.
Speaker 2 (02:51):
You know, people have been saying, look, it's got to
hit rock bottom and this government's inherited a mess, and
you know it's going to take time for the recovery
to come from rural through to urban. People have been
waiting and waiting and waiting, and they're probably going to
run out of patients. Yeah.
Speaker 3 (03:11):
I think the longer the strikes on, the more awkward
it becomes. I mean, gee, if you go back to
twenty twenty four, the sort of catch line amongst economists
was firstly it was thrive in twenty twenty five, and
then it will survive until twenty twenty five, and now
that sort of recovery that we had been hoping for
is not materializing. I mean, let's be clear, some of
it is due to international factors as well. I think
(03:32):
some of what you see in Yes, what you see
in the numbers there today does show that businesses who
were previously, you know, there was a bit more momentum
coming through in terms of investment spending in particular, they
have pulled back on that quite significantly in the June
quarter in response to Liberation Day and the tariffs and
the uncertainty that that has engendered. I think we've seen
(03:53):
from a financial market perspective over the last two or
three months that financial markets internationally are shrugging some of
that off, whether we see that in New Zealand in
terms of economic activity going forward, we are hopeful that
Mberquarder is back in positive territory, not necessarily really strong
for GDP, but hopefully positive growth and reflecting some of
(04:14):
that sort of I guess idea that you know, maybe
it's not going to be as bad as we had
initially feared in terms of that international situation.
Speaker 2 (04:22):
People were feeling it, and it honestly sometimes feels like
you're being gas lit when you're being told no, no,
things are picking up and we've reached the bottom. It
certainly didn't feel like it at the supermarket.
Speaker 3 (04:34):
Well, yes, and that is one of the issues. I mean,
I was slightly surprised when you look at the household
spending numbers that in fact there was growth in household
spending in the June quarter. Not strong, but there was
growth there. Yet, we know that households are being slapped
around by higher food costs. Food prices are up five
percent from a year ago. Yes, electricity, everyone's feeling that
at the moment. Local government rates of course are still rising. Essentially, insurance, yes,
(04:58):
you know the ones. I mean, there are all things
that there are all things that you can't avoid spending
money on. Really, and look those price and cost breshure.
They're not as widespread as they were back in twenty
twenty two. The inflation situation is not as critical, but
househls are still feeling the pinch, and so that again
just adds to a sense of well, I want to
be careful with how I'm spending my money.
Speaker 2 (05:19):
I totally understand that I've got an interesting text here,
and I think it's given then the figures that came
out this morning too from Auckland International Airport. Of the
million people who are traveling overseas or who are traveling
during the school holidays, that's a hell of a lot
of New Zealanders. And a textas says it's the poor
(05:40):
and the low income who spend locally and also spend
more of their income rather than investing and saving or
spending money overseas. As the saying goes, rich people are
rich because they don't spend money like poor people do.
Nationals focusing on the wrong people. Their lower income owners
are struggling more in choosing not to spend money locally
on the stuff that's in New Zealand. And that could
(06:02):
well be true. Like when Mike was asking about who's
going overseas and how can you afford to there were
texts saying, look, I chose not to do the kitchen
and upgrade the car so I could go overseas. I'd
rather do that than spend here.
Speaker 3 (06:17):
Yeah, And that sort of imbalance I think is also
reflected when we look at the relative relative recovery in
kiwis heading overseas on holiday versus people coming to New Zealand.
I think those sort of departure numbers are back above
pre COVID levels, but the number of people coming here
on holiday from the likes of China and Australia in
(06:38):
the US and aggregate those figures are still sitting about
I think eighty seven percent of pre COVID levels. So
we're spending more overseas and we're not necessarily getting quite
the export receipts coming back on the other side as well.
So again that sort of imbalance just adds to the
difficulties in terms of generating the economic recovery here.
Speaker 2 (06:59):
What is it going to take because if we don't
see a recovery, you know, Christopher Luxen was, let me
be perfectly already was very clear he was all about
getting New Zealand back on track economically so everybody could
do well. That hasn't happened, and he's running out of runway.
Speaker 3 (07:18):
That's right. Look, I think he'll probably get more assistance
from the Reserve Bank.
Speaker 1 (07:22):
Now.
Speaker 3 (07:22):
I think today's data does really raise the chance that
they cut by fifty basis points rather than twenty five
at their next review in October. And it may well
be that the trough of the OCUR is below the
two and a half percent that they had signaled in
their most recent statement as well. So there's a bit
more assistance probably coming through there, I would suspect given
(07:43):
today's numbers. From the government's point of view, as I said,
there's more money planned around infrastructure spending, but to be honest,
across the rest of government spending, they don't have a
lot of scope for boosting that given one the fiscal
position they've inherited, but also the sort of aim to
get back towards surplus. You know, it is a very
(08:07):
hard road road for them to be hoeing at the
moment in terms of that as well. So yeah, in
terms of that recovery, it is becoming sort of increasingly
difficult to see it, and particularly when you factor in
as well net migration. Now we've talked about how this
looks like a recovery being driven by the sort of
provincial areas, the agricultural sector. That sort of recovery is
(08:28):
not something we've seen in New Zealand for probably thirty
five years, the last thirty odd years in New Zealand,
it's been driven largely by net migration and population growth
and by association the housing market. But at the moment,
we've still got net migration falling away, sitting at you know,
two years ago, it was sitting at one hundred and
thirty six thousand net inflow. The last twelve months it's
(08:50):
been about thirteen thousand people, and if anything, probably going
to soften further from here. You're not getting that population growth,
You're not getting economic growth either. It's a very very
difficult situation for the government.
Speaker 2 (09:03):
Well, in a way, I'd be kind of glad if
we got away from our love fear of housing and
depending on housing and migration to push up our economy.
It'd be great if it was you know, real production
as opposed.
Speaker 3 (09:14):
To oh yes, yes, don't get me wrong. I mean
I'm the for the housing house prices you know, stagnating
or potentially coming down, because we do still have an
affordability problem we've seen over the course of the last decade.
If you have strong, sustained population growth without the investment
and infrastructure, it causes some big problems as well. So, yes,
(09:34):
I'm not advocating for no migration, but I am saying
that it does mean that you're sort of economic growth
numbers and aggregate also struggle to sort of get the
momentum that you might have experienced previously and at the
moment from a New Zealand perspective, we haven't really solved
the sort of productivity riddle in terms of our inability
to get better performance out there other.
Speaker 2 (09:55):
Nope, we haven't. So it's been a week of grim news.
Gareth Cannon, thank you so much in for Metrics, Chief Forecaster.
Speaker 1 (10:03):
For more from Kerry Wood and Mornings, listen liven you
Talks at be from nine am weekdays, or follow the
podcast on iHeartRadio.
You're listening to the Kerry Wood and Morning's podcast from
News Talks, he'd b as.
Speaker 2 (00:12):
You heard New Zealand's economy is back in contraction, probably
felt like it while it felt like it because it
was later started. Just up from stats n Z shows
GDP fell zero point nine percent in the three months
to June. That follows six months of growth after six
months of contraction, and it's a reduction well over market
(00:32):
expectations and for Metrics Chief forecaster Gareth Kennan joins me,
good morning.
Speaker 3 (00:37):
To you, Morning Carry.
Speaker 2 (00:40):
Did you predict this? I was just trying to have
a look back through the through the emails and the
news stories.
Speaker 3 (00:47):
We were at the bottom end of market expectations, but
we're affecting a zero point five percent contraction, so that was,
you know, right off the bottom of the chart. As
far as we concerned.
Speaker 2 (00:58):
This is not good news for the government.
Speaker 3 (01:02):
No, given that they've really sort of nailed their colors
to the MTAM getting better through the course of this year.
It is making that position for them particularly difficult to
cling to. And you know they've talked a lot about
getting more infrastructure going and more spending going by the
end of this year and into twenty twenty six, and
(01:22):
certainly the sort of the international wins we're being buffeted
by the sort of lack of domestic recovery that we're
seeing so far does mean that, you know, the onus
really is on some of that to come through, perhaps
if they are looking for a better economic performance before
the election next.
Speaker 2 (01:37):
Year, and that was worth the dairy sector doing well,
you know.
Speaker 3 (01:43):
Yeah, And look, I mean you look at those dairy prices,
you look at meat prices. They have been good. Dairy
production volumes have been okay, although the export numbers in
today's data weren't quite as positive as we might have hoped.
But on the meat side, I mean, you look at
meat production volumes, meat exports, they are under a lot
of pressure. And so look, the price could be a
(02:05):
million dollars for your sheep that you're selling, but if
you don't actually have any sheep to sell, then you're
not going to be making a lot of money. So
I think there is sort of you know, mixed messages
we are getting through there. We've talked about the need
for a bit of patience in terms of that sort
of provincial recovery. We're seeing a little bit of it
in some of the numbers that we get through from
different parts of the country where particularly through the South Island.
(02:27):
I think that sort of agricultural lead recovery is showing
through a bit, but you know, there are still some
obstacles to overcome, and we know that farmers do tend
to be pretty cautious with their spending. You know, they'll
be paying down debt, shoring up their cash position before
they really think about, well, you know, do I need
to spend more on fertilizer or deferred maintenance or a
(02:49):
new use or tractor.
Speaker 2 (02:51):
You know, people have been saying, look, it's got to
hit rock bottom and this government's inherited a mess, and
you know it's going to take time for the recovery
to come from rural through to urban. People have been
waiting and waiting and waiting, and they're probably going to
run out of patients. Yeah.
Speaker 3 (03:11):
I think the longer the strikes on, the more awkward
it becomes. I mean, gee, if you go back to
twenty twenty four, the sort of catch line amongst economists
was firstly it was thrive in twenty twenty five, and
then it will survive until twenty twenty five, and now
that sort of recovery that we had been hoping for
is not materializing. I mean, let's be clear, some of
it is due to international factors as well. I think
(03:32):
some of what you see in Yes, what you see
in the numbers there today does show that businesses who
were previously, you know, there was a bit more momentum
coming through in terms of investment spending in particular, they
have pulled back on that quite significantly in the June
quarter in response to Liberation Day and the tariffs and
the uncertainty that that has engendered. I think we've seen
(03:53):
from a financial market perspective over the last two or
three months that financial markets internationally are shrugging some of
that off, whether we see that in New Zealand in
terms of economic activity going forward, we are hopeful that
Mberquarder is back in positive territory, not necessarily really strong
for GDP, but hopefully positive growth and reflecting some of
(04:14):
that sort of I guess idea that you know, maybe
it's not going to be as bad as we had
initially feared in terms of that international situation.
Speaker 2 (04:22):
People were feeling it, and it honestly sometimes feels like
you're being gas lit when you're being told no, no,
things are picking up and we've reached the bottom. It
certainly didn't feel like it at the supermarket.
Speaker 3 (04:34):
Well, yes, and that is one of the issues. I mean,
I was slightly surprised when you look at the household
spending numbers that in fact there was growth in household
spending in the June quarter. Not strong, but there was
growth there. Yet, we know that households are being slapped
around by higher food costs. Food prices are up five
percent from a year ago. Yes, electricity, everyone's feeling that
at the moment. Local government rates of course are still rising. Essentially, insurance, yes,
(04:58):
you know the ones. I mean, there are all things
that there are all things that you can't avoid spending
money on. Really, and look those price and cost breshure.
They're not as widespread as they were back in twenty
twenty two. The inflation situation is not as critical, but
househls are still feeling the pinch, and so that again
just adds to a sense of well, I want to
be careful with how I'm spending my money.
Speaker 2 (05:19):
I totally understand that I've got an interesting text here,
and I think it's given then the figures that came
out this morning too from Auckland International Airport. Of the
million people who are traveling overseas or who are traveling
during the school holidays, that's a hell of a lot
of New Zealanders. And a textas says it's the poor
(05:40):
and the low income who spend locally and also spend
more of their income rather than investing and saving or
spending money overseas. As the saying goes, rich people are
rich because they don't spend money like poor people do.
Nationals focusing on the wrong people. Their lower income owners
are struggling more in choosing not to spend money locally
on the stuff that's in New Zealand. And that could
(06:02):
well be true. Like when Mike was asking about who's
going overseas and how can you afford to there were
texts saying, look, I chose not to do the kitchen
and upgrade the car so I could go overseas. I'd
rather do that than spend here.
Speaker 3 (06:17):
Yeah, And that sort of imbalance I think is also
reflected when we look at the relative relative recovery in
kiwis heading overseas on holiday versus people coming to New Zealand.
I think those sort of departure numbers are back above
pre COVID levels, but the number of people coming here
on holiday from the likes of China and Australia in
(06:38):
the US and aggregate those figures are still sitting about
I think eighty seven percent of pre COVID levels. So
we're spending more overseas and we're not necessarily getting quite
the export receipts coming back on the other side as well.
So again that sort of imbalance just adds to the
difficulties in terms of generating the economic recovery here.
Speaker 2 (06:59):
What is it going to take because if we don't
see a recovery, you know, Christopher Luxen was, let me
be perfectly already was very clear he was all about
getting New Zealand back on track economically so everybody could
do well. That hasn't happened, and he's running out of runway.
Speaker 3 (07:18):
That's right. Look, I think he'll probably get more assistance
from the Reserve Bank.
Speaker 1 (07:22):
Now.
Speaker 3 (07:22):
I think today's data does really raise the chance that
they cut by fifty basis points rather than twenty five
at their next review in October. And it may well
be that the trough of the OCUR is below the
two and a half percent that they had signaled in
their most recent statement as well. So there's a bit
more assistance probably coming through there, I would suspect given
(07:43):
today's numbers. From the government's point of view, as I said,
there's more money planned around infrastructure spending, but to be honest,
across the rest of government spending, they don't have a
lot of scope for boosting that given one the fiscal
position they've inherited, but also the sort of aim to
get back towards surplus. You know, it is a very
(08:07):
hard road road for them to be hoeing at the
moment in terms of that as well. So yeah, in
terms of that recovery, it is becoming sort of increasingly
difficult to see it, and particularly when you factor in
as well net migration. Now we've talked about how this
looks like a recovery being driven by the sort of
provincial areas, the agricultural sector. That sort of recovery is
(08:28):
not something we've seen in New Zealand for probably thirty
five years, the last thirty odd years in New Zealand,
it's been driven largely by net migration and population growth
and by association the housing market. But at the moment,
we've still got net migration falling away, sitting at you know,
two years ago, it was sitting at one hundred and
thirty six thousand net inflow. The last twelve months it's
(08:50):
been about thirteen thousand people, and if anything, probably going
to soften further from here. You're not getting that population growth,
You're not getting economic growth either. It's a very very
difficult situation for the government.
Speaker 2 (09:03):
Well, in a way, I'd be kind of glad if
we got away from our love fear of housing and
depending on housing and migration to push up our economy.
It'd be great if it was you know, real production
as opposed.
Speaker 3 (09:14):
To oh yes, yes, don't get me wrong. I mean
I'm the for the housing house prices you know, stagnating
or potentially coming down, because we do still have an
affordability problem we've seen over the course of the last decade.
If you have strong, sustained population growth without the investment
and infrastructure, it causes some big problems as well. So, yes,
(09:34):
I'm not advocating for no migration, but I am saying
that it does mean that you're sort of economic growth
numbers and aggregate also struggle to sort of get the
momentum that you might have experienced previously and at the
moment from a New Zealand perspective, we haven't really solved
the sort of productivity riddle in terms of our inability
to get better performance out there other.
Speaker 2 (09:55):
Nope, we haven't. So it's been a week of grim news.
Gareth Cannon, thank you so much in for Metrics, Chief Forecaster.
Speaker 1 (10:03):
For more from Kerry Wood and Mornings, listen liven you
Talks at be from nine am weekdays, or follow the
podcast on iHeartRadio.
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