December 19, 2024 • 6 mins
This was a dire week for the economy - but experts say things can only go up from here.
Stats NZ revealed that GDP was down 1 percent in the September quarter, and had been down 1.1 percent the previous quarter.
This is the biggest drop since 1991, excluding the Covid-19 lockdowns.
Despite the gloomy outlook, NZ Herald business editor at large Liam Dann says this will likely be as bad as things get before things pick up.
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Speaker 1 (00:00):
And we're going to our business man, Liam Dan. Liam,
good to have you on this show, GDP. This is
a big story today.
Speaker 2 (00:11):
We've been talking about it all afternoon, as I'm sure
you've been writing about it all day. So one percent
down for quarter three and then we had a revised
quarter two number one point one.
Speaker 3 (00:23):
Yeah, so it's actually a weird one. You know, the
more you look at it, it looked, you know, the
initial reaction was holy heck, this is really ugly, and
it was, but then you look at the revisions and
so it turns out that in twenty twenty three we
never had a recession according to these numbers. And then
actually the economy, according to the economists and reading is
(00:44):
slightly bigger than across the last two years, has grown
slightly more than originally forecast and then was forecast save
and in the June numbers. So it is like it's
a very gloomy thing to happen right before Christmas we
had that awful half year economic update from the government
and Treasury as well. But I just think it's important
(01:06):
at this point in time to put it in context
and go, hey, this has already happened, so this is historic.
It really just tells us that how bad it felt
in the middle of the year, you know, and lines
up a bit more with the anecdotes and about about
how bad things were. But it doesn't kind of change
reality in our world. And the economists are still pretty
(01:29):
optimistic that this was the worst of it. So I
don't know, I might be clutching at straws and I'm
trying to be a bit optimistic as we hit into Christmas.
Speaker 1 (01:36):
Well, we certainly need it.
Speaker 2 (01:37):
I mean, the number was quite shocking, and and the
revised number, you know, equally as shocking. We had Stephen
Joyce on earlier he Reckons and he said that Adrian
or has a lot of questions to answer now he's
overcooked the correction.
Speaker 1 (01:50):
Do you agree with that?
Speaker 3 (01:52):
Well, I mean, I guess that is something that you've
got to ask. I mean that that they we were
all screaming for inflation to be taken out. I got
to say, including Stephen Joyce, everyone wanted to see them
really hammer inflation, and so they've they've gone really hard.
Look it may it's certainly going to raise calls for
some Some economists are saying we need to go seventy
(02:14):
five basis points for the next cut, get it down faster. Yeah,
I mean, I guess, I guess there's an argument there.
I do think it is important to look at what's
happened to these numbers and what's happening at stats n Z.
It is a really odd one. You know, they've done
a lot of seat, They've had to rework all their
seasonal adjustments, and you've now got economists saying that the
next quarter might look really strong, stronger than it really
(02:38):
matches up with their real world experience. So I'd put
a caveat around the GDP numbers for a little while.
In fact, they always seem to be revised, and I
try to put caveats around it. Then they have to
write the story with the horrible headline when it all breaks,
of course, But yeah, I think I think we've got
to be a bit careful. I use the analogy of
if you survive a hurricane and you thought you're surviving
(02:59):
a category four hurricane and you get through it, and
then someone tells you you've just survived a category five hurricane,
you know you shouldn't really feel any worse. You should
possibly feel a little better that you've got through it.
So I mean, everyone was pretty glum in the middle
of the year, and maybe the numbers didn't seem that bad,
and now we know it was that bad. So look,
(03:20):
you know, fair play to guys like Joyce and a
few other commentators who were saying that this is the
worse since ninety one. It does appear to be the
worse since ninety one. But I think, you know, there
is some cause for optimism, inflation under control, some growth
coming our way. I know there's a whole bigger story
about actually reinventing their economy, transforming it, getting some productivity going,
(03:42):
and finding some real growth. But regardless of that, it
does look like twenty twenty five is going to look better,
So that story hasn't changed.
Speaker 2 (03:49):
Do we not rely on these on GDP figures going forward?
Speaker 1 (03:54):
Then?
Speaker 2 (03:55):
How did they get the quarter two numbers so wrong?
And the seasonally adjusted thing that you're talking about, what's
going on there?
Speaker 3 (04:01):
Well, from what I can see, and I'm doing a
lot of reading, there was a lot of COVID really
throughout all their sings that they're revised. They do a
revision of methodology in the third Every third quarter there's
a big revision of methodology and that's good practice. You
want to make sure it's all good. But they've found
that there's seasonal there's seasonal adjustments that they do to
(04:22):
try and keep it all and tick. We're out, and
they've had to redo those quite substantially. It's kind of
the case that they've kind of like they know how
much the economy has grown, but how they are proportionate
across each quarter has been out of whack. And so
now you have the data for that middle of the
(04:44):
year looking more like what people were seeing, and things
like the production of manufacturing statistics and some of that
more minuted data looked really grim and then so now
these GDP numbers match that. So they're sort of starting
to get it back in line, I hope, But it
does remind you that some of these things. First of all,
GDP is a very tough thing to measure. It's every
(05:06):
single bit of action that happens in the economy, everything
we make, everything we do, everything we spend. So that's
always tough, and it's been particularly tough in the past
two or three years. One would hope that that we
can rely on them for the trend, but I would
always say there's a caveat on that initial number when
it comes out, and be a bit wary of, you know,
(05:28):
worrying too much about technical recessions. We know that we're
in a you know, we know when we're in a downturn.
We know when things are going bad, and look at
look at measures like the jobs lost and the business
is closing down, all that sort of stuff. If you
want to see real hard data and what's happening in
the real world.
Speaker 2 (05:46):
Just walk down the street in Main Street. You can
see it too, Liam, can't you? Thank you very much
for that run down lamb down news zelln Herald Business
editor at Large.
Speaker 3 (05:55):
For more from Heather Duplessy Allen Drive, listen live to
news talks he'd be from four weekdays, or follow the
podcast on iHeartRadio.
And we're going to our business man, Liam Dan. Liam,
good to have you on this show, GDP. This is
a big story today.
Speaker 2 (00:11):
We've been talking about it all afternoon, as I'm sure
you've been writing about it all day. So one percent
down for quarter three and then we had a revised
quarter two number one point one.
Speaker 3 (00:23):
Yeah, so it's actually a weird one. You know, the
more you look at it, it looked, you know, the
initial reaction was holy heck, this is really ugly, and
it was, but then you look at the revisions and
so it turns out that in twenty twenty three we
never had a recession according to these numbers. And then
actually the economy, according to the economists and reading is
(00:44):
slightly bigger than across the last two years, has grown
slightly more than originally forecast and then was forecast save
and in the June numbers. So it is like it's
a very gloomy thing to happen right before Christmas we
had that awful half year economic update from the government
and Treasury as well. But I just think it's important
(01:06):
at this point in time to put it in context
and go, hey, this has already happened, so this is historic.
It really just tells us that how bad it felt
in the middle of the year, you know, and lines
up a bit more with the anecdotes and about about
how bad things were. But it doesn't kind of change
reality in our world. And the economists are still pretty
(01:29):
optimistic that this was the worst of it. So I
don't know, I might be clutching at straws and I'm
trying to be a bit optimistic as we hit into Christmas.
Speaker 1 (01:36):
Well, we certainly need it.
Speaker 2 (01:37):
I mean, the number was quite shocking, and and the
revised number, you know, equally as shocking. We had Stephen
Joyce on earlier he Reckons and he said that Adrian
or has a lot of questions to answer now he's
overcooked the correction.
Speaker 1 (01:50):
Do you agree with that?
Speaker 3 (01:52):
Well, I mean, I guess that is something that you've
got to ask. I mean that that they we were
all screaming for inflation to be taken out. I got
to say, including Stephen Joyce, everyone wanted to see them
really hammer inflation, and so they've they've gone really hard.
Look it may it's certainly going to raise calls for
some Some economists are saying we need to go seventy
(02:14):
five basis points for the next cut, get it down faster. Yeah,
I mean, I guess, I guess there's an argument there.
I do think it is important to look at what's
happened to these numbers and what's happening at stats n Z.
It is a really odd one. You know, they've done
a lot of seat, They've had to rework all their
seasonal adjustments, and you've now got economists saying that the
next quarter might look really strong, stronger than it really
(02:38):
matches up with their real world experience. So I'd put
a caveat around the GDP numbers for a little while.
In fact, they always seem to be revised, and I
try to put caveats around it. Then they have to
write the story with the horrible headline when it all breaks,
of course, But yeah, I think I think we've got
to be a bit careful. I use the analogy of
if you survive a hurricane and you thought you're surviving
(02:59):
a category four hurricane and you get through it, and
then someone tells you you've just survived a category five hurricane,
you know you shouldn't really feel any worse. You should
possibly feel a little better that you've got through it.
So I mean, everyone was pretty glum in the middle
of the year, and maybe the numbers didn't seem that bad,
and now we know it was that bad. So look,
(03:20):
you know, fair play to guys like Joyce and a
few other commentators who were saying that this is the
worse since ninety one. It does appear to be the
worse since ninety one. But I think, you know, there
is some cause for optimism, inflation under control, some growth
coming our way. I know there's a whole bigger story
about actually reinventing their economy, transforming it, getting some productivity going,
(03:42):
and finding some real growth. But regardless of that, it
does look like twenty twenty five is going to look better,
So that story hasn't changed.
Speaker 2 (03:49):
Do we not rely on these on GDP figures going forward?
Speaker 1 (03:54):
Then?
Speaker 2 (03:55):
How did they get the quarter two numbers so wrong?
And the seasonally adjusted thing that you're talking about, what's
going on there?
Speaker 3 (04:01):
Well, from what I can see, and I'm doing a
lot of reading, there was a lot of COVID really
throughout all their sings that they're revised. They do a
revision of methodology in the third Every third quarter there's
a big revision of methodology and that's good practice. You
want to make sure it's all good. But they've found
that there's seasonal there's seasonal adjustments that they do to
(04:22):
try and keep it all and tick. We're out, and
they've had to redo those quite substantially. It's kind of
the case that they've kind of like they know how
much the economy has grown, but how they are proportionate
across each quarter has been out of whack. And so
now you have the data for that middle of the
(04:44):
year looking more like what people were seeing, and things
like the production of manufacturing statistics and some of that
more minuted data looked really grim and then so now
these GDP numbers match that. So they're sort of starting
to get it back in line, I hope, But it
does remind you that some of these things. First of all,
GDP is a very tough thing to measure. It's every
(05:06):
single bit of action that happens in the economy, everything
we make, everything we do, everything we spend. So that's
always tough, and it's been particularly tough in the past
two or three years. One would hope that that we
can rely on them for the trend, but I would
always say there's a caveat on that initial number when
it comes out, and be a bit wary of, you know,
(05:28):
worrying too much about technical recessions. We know that we're
in a you know, we know when we're in a downturn.
We know when things are going bad, and look at
look at measures like the jobs lost and the business
is closing down, all that sort of stuff. If you
want to see real hard data and what's happening in
the real world.
Speaker 2 (05:46):
Just walk down the street in Main Street. You can
see it too, Liam, can't you? Thank you very much
for that run down lamb down news zelln Herald Business
editor at Large.
Speaker 3 (05:55):
For more from Heather Duplessy Allen Drive, listen live to
news talks he'd be from four weekdays, or follow the
podcast on iHeartRadio.
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