June 19, 2024 • 10 mins
The news New Zealand is out of a technical recession isn't necessarily cause for celebration.
Stats NZ figures show GDP rose 0.2% in the three months to March and 0.2% in the year to March.
But Herald Business Editor Liam Dann told Kerre Woodham that we could still see a series of further per capita contractions over the next few quarters.
He says if we don't end up back in a technical recession, things could go backwards in another quarter due to the crunch starting to bite on interest rates.
The Reserve Bank says the growth outlook for the rest of this year is slightly more positive.
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Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:06):
You're listening to the carry Wood of morning's podcast from
News Talk said.
Speaker 2 (00:10):
Be so just before the news said that we're technically
out of a recession. That stats New Zealand show GDP
grew zero point two percent in the three months to March,
which followed two consecutive quarterly contractions. A Texas says, we're
still in a recession. Zero point two percent does not
(00:31):
take into account immigration and inflation. It's all good saying
zero point two percent more money was pushed around in
the economy, but there when that money has devalued twenty percent,
then the actual meaningful GDP is going down. Thanks Jasinda
and all her sheep, says a Texter. Well, what does
our New Zealand Herald Business editor at large have to say?
(00:53):
From South Liam Dan, good morning.
Speaker 3 (00:55):
Yeah, Hi, Carry I mean, I'm afraid I'm not cheering on,
you know, celebrating being out of recession too much either.
To be honest, that per capita thing really is the killer.
Speaker 2 (01:04):
And that's what our text will say, is right.
Speaker 3 (01:05):
The immigration, So on an annual basis, I think we're
down negative two point four percent on a per capita basis,
So that's you know what you feel your share as
an individual has gone down six quarters in a row
of negative per capita GDP growth, and this is, yeah, look,
(01:27):
technically a little bit of an upswing, driven weirdly by
things like electricity, gas and water services. So sort of
I guess more output there and you know, higher prices
and all that sort of stuff, but the stuff that
was a downward driver with the things that you see
and you hear about every day, which is construction down
(01:47):
three point one percent, manufacturing down one point two percent.
So you know that real you know, front end of
the economy still contracting, and I think, to be brutally honest,
I think we're still on for probably a series of
further per capital contractions in the in the next few quarters,
(02:10):
and possibly, you know, if not back into technical recession,
we could easily see another quarter where we go backwards
because the crunch is really starting to buit and it's
really starting to bite on interest rates right now, and
so we've seen things like the services sector being hit
very hard in the immediate quarter we're in, and of
course that's what the Reserve Bank needs to see. So
(02:31):
in some ways, this sort of technical bounce out of
recession just just confuses things a bit, and we can't
even claim the good news that we're getting it over
with quicker. So that's cherry.
Speaker 2 (02:42):
Sorry, thanks for you all, But it is actually everything
we fared. This is exactly what you said the worst
case scenario would be, right, what we've got ourselves in.
Speaker 3 (02:54):
Yeah, the stagflation as well, and I talked about it, well,
you talked about it years ago. Yeah, I talked This
columniated on Sunday was actually a repeatd one.
Speaker 2 (03:02):
You know, I remember us having this conversation that we
wouldn't want to see precisely what's happening.
Speaker 3 (03:08):
But look, look for some positivity there. We are sort
of moving still. We're still seeing inflation come out, so
I'm still hopeful that we're not stuck in the kind
of stagflation that we saw in the late seventies because
we've got you know, monetary policy doing the job. It's
just is painful. We've got this non tradable services sector, wages,
(03:29):
all that sort of stuff in the economy staying far
too high. But that is also the part of the
economy that we're seeing come off really fast. So there's
some signs there. You know, We've talked about it before.
There's a big debate about when we might see interstrates
cut and when it all might start to come right.
The Reserve Bank talking very tough and talking about September
(03:50):
twenty twenty five. I think today's GDPs come in line
with their expectations, so they sort of get to hold
the line there. But the consensus of economists is still February.
They feel that it'll you know, it'll stay grim and
turn faster. But I guess I'm you know, we're talking
about a few months inside. But yeah, there's there's no
(04:13):
way around it. You've got to go through it. Unfortunately.
Speaker 2 (04:17):
Yeah, you know that things will get better, Things will
get better, things will get better. Like in the scheme
of things, people have been trying to be resilient and
hold on and hope for things to get better for
damn near five years.
Speaker 3 (04:30):
Yeah, well, it's a horrible set of circumstances to you
get your pandemic, inflation, then recession. That's that's that's pretty grim.
I again, I don't want to be too negative on
it on a.
Speaker 2 (04:43):
On a day where we've got our health.
Speaker 3 (04:45):
But look, there's a there's an awful lot of focus
on the cyclical stuff and I'm I'm I'm actually quite
positive about the cyclical stuff. I know, you know, it
feels bad. Is it going to be February? Is it
going to be you know, would rather it was November. Whatever.
That is turning. That cycle is turning. We're seeing it
around the world. We're seeing it in New Zealand. That
will reach some sort of rebalancing and hopefully without too
(05:08):
much unemployment, So without unemployment going to record levels or
anything like that.
Speaker 2 (05:13):
The four percentage four and a half of all take
well as not the worst it's ever been, no, no.
Speaker 3 (05:18):
And it may head up to five or five point five,
and that would be around our historical average. And it
feels terrible getting there, and a lot of people are
losing their jobs and that's causing a lot of stress
in the economy as well. But I still believe quite
firmly that we will get through that cyclical piece. That
there is a bigger challenge there and that is where
(05:39):
we get back to some real growth, so we can
you know, getting back to neutral isn't really going to
be good enough. There's some sort of bigger warnings we've
had from like the Fitch Ratings Agency and things about
the big drivers of economic growth in this country sort
of petering out, and so your dairy booms petering out
to chry. You know, we're still selling heaps of dairy
(06:00):
to China. China is still an enormous economy, but the
growth we got from it in the decade before COVID
is not going to be repeated. The growth we got
from tourism, well, you know, tourism getting back to where
we were before COVID, that'll hopefully continue.
Speaker 2 (06:13):
Well we're only about eighty percent, Yeah, that's.
Speaker 3 (06:15):
Right, So there's a fair bit of growth there. But
beyond those things, what then drives the New Zealand economy
to create growth for you know, our kids and all
that sort of stuff. And that's a bit of a
missing piece of the puzzle. You know, what's the next
big thing? I know, you know, it's hard to start
worrying about the long term when you're stuck in the
short term grim cycle. But you know, the Leavers are
(06:38):
working in this short term cyclical stuff. I think we
can get back to some sort of neutral next year,
but I think, you know, I don't know that we
can afford to wait until everything is sort of magically
imbalanced before we start dealing with those bigger challenges because
you know, actually, if you look at economics, there's always
something a little bit out of whack. So what now
(07:00):
seemed like very stable times pre pandemic, you know, we
were dealing with deflation and you know, low growth, and
you know, there's always something causing an issue. So I
guess there's different parts to it, you know, But what
the economy should be doing is creating a platform with
some opportunity in it for people to take their own chances.
(07:21):
And yeah, I'm hopeful that we'll get through the cycle,
but I'm a little bit concerned about what the drivers
will be from there.
Speaker 2 (07:30):
What can people do because it's a recession of two halves.
There's the ones who are clawing from paycheck to paycheck
if they're lucky enough to have one, and then there
are others who have paid off the mortgage and are fine. Yeah,
it's so what should both sectors be doing?
Speaker 3 (07:50):
Normally you'd say get out and spend. I'm not quite
sure that that's the message.
Speaker 2 (07:53):
Right now, you know, even for the wealthy.
Speaker 3 (07:56):
Yeah, I mean, we don't. We want that inflation gone.
There will be there'll be a switch at some point
where we really want, you know, those who've got the
mortgage paid all were paid down to get out and spend.
But I guess look, you know, at a micro level,
do go and support your local cafe and support your
local shops and all that sort of stuff that's important,
though we don't because the risk in a recession, the
(08:20):
big risk is in terms of our lifestyles, beyond losing
your job, is that things that we love disappear.
Speaker 2 (08:26):
And that's you know, well, yeah, I got some money unexpected,
not a lot, not enough to pay off the mortgage,
but you know, a bit of disposable income. So I
went and got a dress made from a New Zealand
dressmaker who makes dresses here, you know, and and that
that was I needed it for work. But it also
feels good being I'm not buying off bloody team and that.
Speaker 3 (08:47):
And you don't want us to get out the other
side and have lost all these great businesses that care
about because they just didn't make it through, you know,
a recession. Sometimes they talk about sort of a forest
fire thing. You know, it's not quite the same. You know,
in the GFC, we had this massive collapse and there
was a whole a bunch of businesses that needed to fail,
(09:07):
and this time it is it is more brutal, it's
sort of it's being engineered. We've got to get back
to neutral. But you know, we don't want to lose
the best of all those businesses while we're you know,
engineering a recession, you know, so that you know, and
I hear a lot of people readers and listeners talking about,
(09:29):
you know, how cruel the Reserve Bank is. But that's
why I've sort of written about stagflation getting stuck there
as far worse. And so that's why they're being so
tough right now. They know that you can get stuck
in a stagflation with you know, inflation was to stay
above three percent just persistently, you're just you, and you
wouldn't have high economic growth, you'd have rising unemployment, and
(09:53):
you know, the opportunity really disappears. So I think I've
used the band aid analogy a lot of times. I wish,
I wish in hindsight, we'd gone a bit harder earlier.
I mean, you know, it was not really even hindsight.
Myself and other people to a greater extent were saying
it at the time.
Speaker 2 (10:10):
Yeah, I know, I remember we've had these conversations that
through and thus as it has come to fast.
Speaker 3 (10:14):
I was never I was never, you know, opposed to
some stimulus to get us through COVID, but I think
we needed to rebalance faster, and I think we still
need to get there fast because I think the length
of time that this grind is taking is just much
for many people.
Speaker 2 (10:29):
It absolutely is. Thank you so much that way, I'm
thanking you. I knows, go and peace, I'll say Liam
dan And New Zealand Herald Business editor at large News
Talk said B. It is eleven eighteen.
Speaker 1 (10:45):
For more from Kerry Wooden Mornings, listen live to News
Talk Said B from nine am weekdays, or follow the
podcast on iHeartRadio
You're listening to the carry Wood of morning's podcast from
News Talk said.
Speaker 2 (00:10):
Be so just before the news said that we're technically
out of a recession. That stats New Zealand show GDP
grew zero point two percent in the three months to March,
which followed two consecutive quarterly contractions. A Texas says, we're
still in a recession. Zero point two percent does not
(00:31):
take into account immigration and inflation. It's all good saying
zero point two percent more money was pushed around in
the economy, but there when that money has devalued twenty percent,
then the actual meaningful GDP is going down. Thanks Jasinda
and all her sheep, says a Texter. Well, what does
our New Zealand Herald Business editor at large have to say?
(00:53):
From South Liam Dan, good morning.
Speaker 3 (00:55):
Yeah, Hi, Carry I mean, I'm afraid I'm not cheering on,
you know, celebrating being out of recession too much either.
To be honest, that per capita thing really is the killer.
Speaker 2 (01:04):
And that's what our text will say, is right.
Speaker 3 (01:05):
The immigration, So on an annual basis, I think we're
down negative two point four percent on a per capita basis,
So that's you know what you feel your share as
an individual has gone down six quarters in a row
of negative per capita GDP growth, and this is, yeah, look,
(01:27):
technically a little bit of an upswing, driven weirdly by
things like electricity, gas and water services. So sort of
I guess more output there and you know, higher prices
and all that sort of stuff, but the stuff that
was a downward driver with the things that you see
and you hear about every day, which is construction down
(01:47):
three point one percent, manufacturing down one point two percent.
So you know that real you know, front end of
the economy still contracting, and I think, to be brutally honest,
I think we're still on for probably a series of
further per capital contractions in the in the next few quarters,
(02:10):
and possibly, you know, if not back into technical recession,
we could easily see another quarter where we go backwards
because the crunch is really starting to buit and it's
really starting to bite on interest rates right now, and
so we've seen things like the services sector being hit
very hard in the immediate quarter we're in, and of
course that's what the Reserve Bank needs to see. So
(02:31):
in some ways, this sort of technical bounce out of
recession just just confuses things a bit, and we can't
even claim the good news that we're getting it over
with quicker. So that's cherry.
Speaker 2 (02:42):
Sorry, thanks for you all, But it is actually everything
we fared. This is exactly what you said the worst
case scenario would be, right, what we've got ourselves in.
Speaker 3 (02:54):
Yeah, the stagflation as well, and I talked about it, well,
you talked about it years ago. Yeah, I talked This
columniated on Sunday was actually a repeatd one.
Speaker 2 (03:02):
You know, I remember us having this conversation that we
wouldn't want to see precisely what's happening.
Speaker 3 (03:08):
But look, look for some positivity there. We are sort
of moving still. We're still seeing inflation come out, so
I'm still hopeful that we're not stuck in the kind
of stagflation that we saw in the late seventies because
we've got you know, monetary policy doing the job. It's
just is painful. We've got this non tradable services sector, wages,
(03:29):
all that sort of stuff in the economy staying far
too high. But that is also the part of the
economy that we're seeing come off really fast. So there's
some signs there. You know, We've talked about it before.
There's a big debate about when we might see interstrates
cut and when it all might start to come right.
The Reserve Bank talking very tough and talking about September
(03:50):
twenty twenty five. I think today's GDPs come in line
with their expectations, so they sort of get to hold
the line there. But the consensus of economists is still February.
They feel that it'll you know, it'll stay grim and
turn faster. But I guess I'm you know, we're talking
about a few months inside. But yeah, there's there's no
(04:13):
way around it. You've got to go through it. Unfortunately.
Speaker 2 (04:17):
Yeah, you know that things will get better, Things will
get better, things will get better. Like in the scheme
of things, people have been trying to be resilient and
hold on and hope for things to get better for
damn near five years.
Speaker 3 (04:30):
Yeah, well, it's a horrible set of circumstances to you
get your pandemic, inflation, then recession. That's that's that's pretty grim.
I again, I don't want to be too negative on
it on a.
Speaker 2 (04:43):
On a day where we've got our health.
Speaker 3 (04:45):
But look, there's a there's an awful lot of focus
on the cyclical stuff and I'm I'm I'm actually quite
positive about the cyclical stuff. I know, you know, it
feels bad. Is it going to be February? Is it
going to be you know, would rather it was November. Whatever.
That is turning. That cycle is turning. We're seeing it
around the world. We're seeing it in New Zealand. That
will reach some sort of rebalancing and hopefully without too
(05:08):
much unemployment, So without unemployment going to record levels or
anything like that.
Speaker 2 (05:13):
The four percentage four and a half of all take
well as not the worst it's ever been, no, no.
Speaker 3 (05:18):
And it may head up to five or five point five,
and that would be around our historical average. And it
feels terrible getting there, and a lot of people are
losing their jobs and that's causing a lot of stress
in the economy as well. But I still believe quite
firmly that we will get through that cyclical piece. That
there is a bigger challenge there and that is where
(05:39):
we get back to some real growth, so we can
you know, getting back to neutral isn't really going to
be good enough. There's some sort of bigger warnings we've
had from like the Fitch Ratings Agency and things about
the big drivers of economic growth in this country sort
of petering out, and so your dairy booms petering out
to chry. You know, we're still selling heaps of dairy
(06:00):
to China. China is still an enormous economy, but the
growth we got from it in the decade before COVID
is not going to be repeated. The growth we got
from tourism, well, you know, tourism getting back to where
we were before COVID, that'll hopefully continue.
Speaker 2 (06:13):
Well we're only about eighty percent, Yeah, that's.
Speaker 3 (06:15):
Right, So there's a fair bit of growth there. But
beyond those things, what then drives the New Zealand economy
to create growth for you know, our kids and all
that sort of stuff. And that's a bit of a
missing piece of the puzzle. You know, what's the next
big thing? I know, you know, it's hard to start
worrying about the long term when you're stuck in the
short term grim cycle. But you know, the Leavers are
(06:38):
working in this short term cyclical stuff. I think we
can get back to some sort of neutral next year,
but I think, you know, I don't know that we
can afford to wait until everything is sort of magically
imbalanced before we start dealing with those bigger challenges because
you know, actually, if you look at economics, there's always
something a little bit out of whack. So what now
(07:00):
seemed like very stable times pre pandemic, you know, we
were dealing with deflation and you know, low growth, and
you know, there's always something causing an issue. So I
guess there's different parts to it, you know, But what
the economy should be doing is creating a platform with
some opportunity in it for people to take their own chances.
(07:21):
And yeah, I'm hopeful that we'll get through the cycle,
but I'm a little bit concerned about what the drivers
will be from there.
Speaker 2 (07:30):
What can people do because it's a recession of two halves.
There's the ones who are clawing from paycheck to paycheck
if they're lucky enough to have one, and then there
are others who have paid off the mortgage and are fine. Yeah,
it's so what should both sectors be doing?
Speaker 3 (07:50):
Normally you'd say get out and spend. I'm not quite
sure that that's the message.
Speaker 2 (07:53):
Right now, you know, even for the wealthy.
Speaker 3 (07:56):
Yeah, I mean, we don't. We want that inflation gone.
There will be there'll be a switch at some point
where we really want, you know, those who've got the
mortgage paid all were paid down to get out and spend.
But I guess look, you know, at a micro level,
do go and support your local cafe and support your
local shops and all that sort of stuff that's important,
though we don't because the risk in a recession, the
(08:20):
big risk is in terms of our lifestyles, beyond losing
your job, is that things that we love disappear.
Speaker 2 (08:26):
And that's you know, well, yeah, I got some money unexpected,
not a lot, not enough to pay off the mortgage,
but you know, a bit of disposable income. So I
went and got a dress made from a New Zealand
dressmaker who makes dresses here, you know, and and that
that was I needed it for work. But it also
feels good being I'm not buying off bloody team and that.
Speaker 3 (08:47):
And you don't want us to get out the other
side and have lost all these great businesses that care
about because they just didn't make it through, you know,
a recession. Sometimes they talk about sort of a forest
fire thing. You know, it's not quite the same. You know,
in the GFC, we had this massive collapse and there
was a whole a bunch of businesses that needed to fail,
(09:07):
and this time it is it is more brutal, it's
sort of it's being engineered. We've got to get back
to neutral. But you know, we don't want to lose
the best of all those businesses while we're you know,
engineering a recession, you know, so that you know, and
I hear a lot of people readers and listeners talking about,
(09:29):
you know, how cruel the Reserve Bank is. But that's
why I've sort of written about stagflation getting stuck there
as far worse. And so that's why they're being so
tough right now. They know that you can get stuck
in a stagflation with you know, inflation was to stay
above three percent just persistently, you're just you, and you
wouldn't have high economic growth, you'd have rising unemployment, and
(09:53):
you know, the opportunity really disappears. So I think I've
used the band aid analogy a lot of times. I wish,
I wish in hindsight, we'd gone a bit harder earlier.
I mean, you know, it was not really even hindsight.
Myself and other people to a greater extent were saying
it at the time.
Speaker 2 (10:10):
Yeah, I know, I remember we've had these conversations that
through and thus as it has come to fast.
Speaker 3 (10:14):
I was never I was never, you know, opposed to
some stimulus to get us through COVID, but I think
we needed to rebalance faster, and I think we still
need to get there fast because I think the length
of time that this grind is taking is just much
for many people.
Speaker 2 (10:29):
It absolutely is. Thank you so much that way, I'm
thanking you. I knows, go and peace, I'll say Liam
dan And New Zealand Herald Business editor at large News
Talk said B. It is eleven eighteen.
Speaker 1 (10:45):
For more from Kerry Wooden Mornings, listen live to News
Talk Said B from nine am weekdays, or follow the
podcast on iHeartRadio
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