June 24, 2025 • 4 mins
According to one expert, last week's GDP figures are a sign New Zealand's economy is on the up.
Stats NZ says our gross domestic product grew a strong 0.8 percent in this year's first quarter.
HSBC chief economist Paul Bloxham explains further,
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Episode Transcript
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Speaker 1 (00:00):
AGSPC chief economist Paul Bloxham is back with us. Hello, Paul.
Good eight Now, Paul, you've been telling me for months
that you think the New Zealand economy is doing better
than we think. You got the numbers now to back
you up.
Speaker 2 (00:11):
Yeah, Well, we got the GDP figures and they were
fairly strong. I think, you know, aligned with the sort
of view we've had for a little while that New
Zealand would be in an economic upswing this year, and
it would be a reasonable reasonable one. We've got GDP
running at point eight in the quarter. That's actually a
pretty decent number. It was twice the pace that the
Central Bank had been forecasting just in their last set
(00:31):
of forecasts. And we think it's underpinned by things that
will continue to lift growth through the year. The two
big ones that interest rates have already come down a
long way two hundred and twenty five basis points of
easing so far, and that's going to start to flow through.
Its effect takes time, but it'll flow through. And the
other big one, of course, is that dairy prices are
high and you've got a positive lift in exports going on.
(00:54):
That's driving incomes in the agricultural sector, and we think
that tends to flow over through to the cities as well.
Makes a little bit of time. So those two big
factors we think are driving New Zealand into an economic
upswing this year.
Speaker 1 (01:06):
Do you think the beating of expectations that happened in
the first quarter carries on throughout the year?
Speaker 2 (01:11):
We do think that where our forecast is at the
top edge of the consensus. So if you listed off
all the economists right now and looked at what their
full casts are for growth for New Zealand this year,
we would be at the top of that list. And
that's because we think that actually there's going to be
a bit more momentum than others do. So yes, I
think in principle we think that quite a bit of
(01:32):
the momentum that started off in the first quarter continues
into the rest of the year.
Speaker 1 (01:37):
So the thing that's given people a bit of the
wobbles is the readings we got in May, right for
the PMI and the PSIE. You're not too worried about that.
Speaker 2 (01:44):
I think you've got to be careful to overly interpret
any one month's indicator. And you've have got this set
of indicators for may that have weakened, but keep in
mind what's going on globally and then try to have
a think about why sort of the global shops that
are going on in trade policy should really fundamentally feed
through to New Zealand. And I think it's a stretch
(02:06):
to believe that. You know, it's more likely to be
sentiment than it is likely to be a genuine sort
of slow down in the growth story, given the momentum
we think that's there from as I say, interest rates
coming down and the particularly strong rise in dairy exports.
So while we're aware of it and we're watching it
and that it may prove to be that actually things
have weakened a bit, we're not prepared to jump quite
(02:28):
as strongly in that direction just based on one month's reading.
Speaker 1 (02:32):
Now now you've done a comparison between how our economy
is tracking in Australia and to your mind, we're doing
a lot better than Australia. What's going wrong with them?
Speaker 2 (02:41):
Well, the first thing is that part of this story
is purely cyclical. You know, Australia didn't have as big
a slowdown last year, and so we don't think it's
going to get as big a upswing this year. Inflation's
coming down more slowly. New Zealand had a much deeper
downturn last year, and so interest rates have come down
a lot more quickly, and of course you going to
get as a bat on the back of that, we
(03:01):
think a cyclical upswing. Both economies have some structural challenges
and the primary issue there, of course is that productivity
is weak, and that productivity story is constraining growth in
the economy. It's much more prominent in Australia, though. I
think in Australia we've got some really quite dismal productivity outcomes.
So on the last print we got output per hour work,
(03:24):
which is exactly as it sounds. It's how much output,
how much GDP you get for how many hours you
put into the economy was falling by one percent, if
not by one percent over the past year. This is
not a new story. It's been going on for a
while now. But productivity is really quite a big challenge here.
I know it is in New Zealand too, but it's
an even bigger challenge in Australia, and that is presenting
a pretty decent headwind to the pace at which the
(03:46):
Australian economy can grow.
Speaker 1 (03:48):
Why why is it a bigger problem there?
Speaker 2 (03:51):
I think we just haven't done very much reform in
recent years, and that's one of the factors. I mean,
you could say the same about parts of the New
Zealand story too, and you makers need to really focus
on on the reform agenda. I think the other thing
is that we've seen a lot of growth in the
Australian economy over the past couple of years has been
driven by public spending. It's been public demand. In fact,
(04:11):
you know, eighty percent of the growth in the Australian
economy over the past two years has come from public demand,
or three quarters of the job creation has been public
demand as well. Public demand funded, and so those jobs
tend to have lower levels of productivity on average. We're
talking about things that are motionally related to the care economy,
aged care, disability, the disability insurance scheme, the health, the
(04:32):
health side, and these things tend to have lower productivity.
I think if you looked at the comparable numbers for
New Zealand, although public demand's been solid, it hasn't been
nearly as strong as you've seen in Australia. Yeah.
Speaker 1 (04:43):
Interesting that's fascinating. A good news there. Thank you very much, Paul,
appreciate it. Paul Bloxham, HSBC's chief economist.
Speaker 2 (04:50):
For more from Hither Duplessy Alan Drive, listen live to
news Talks it'd be from four pm weekdays, or follow
the podcast on iHeartRadio
AGSPC chief economist Paul Bloxham is back with us. Hello, Paul.
Good eight Now, Paul, you've been telling me for months
that you think the New Zealand economy is doing better
than we think. You got the numbers now to back
you up.
Speaker 2 (00:11):
Yeah, Well, we got the GDP figures and they were
fairly strong. I think, you know, aligned with the sort
of view we've had for a little while that New
Zealand would be in an economic upswing this year, and
it would be a reasonable reasonable one. We've got GDP
running at point eight in the quarter. That's actually a
pretty decent number. It was twice the pace that the
Central Bank had been forecasting just in their last set
(00:31):
of forecasts. And we think it's underpinned by things that
will continue to lift growth through the year. The two
big ones that interest rates have already come down a
long way two hundred and twenty five basis points of
easing so far, and that's going to start to flow through.
Its effect takes time, but it'll flow through. And the
other big one, of course, is that dairy prices are
high and you've got a positive lift in exports going on.
(00:54):
That's driving incomes in the agricultural sector, and we think
that tends to flow over through to the cities as well.
Makes a little bit of time. So those two big
factors we think are driving New Zealand into an economic
upswing this year.
Speaker 1 (01:06):
Do you think the beating of expectations that happened in
the first quarter carries on throughout the year?
Speaker 2 (01:11):
We do think that where our forecast is at the
top edge of the consensus. So if you listed off
all the economists right now and looked at what their
full casts are for growth for New Zealand this year,
we would be at the top of that list. And
that's because we think that actually there's going to be
a bit more momentum than others do. So yes, I
think in principle we think that quite a bit of
(01:32):
the momentum that started off in the first quarter continues
into the rest of the year.
Speaker 1 (01:37):
So the thing that's given people a bit of the
wobbles is the readings we got in May, right for
the PMI and the PSIE. You're not too worried about that.
Speaker 2 (01:44):
I think you've got to be careful to overly interpret
any one month's indicator. And you've have got this set
of indicators for may that have weakened, but keep in
mind what's going on globally and then try to have
a think about why sort of the global shops that
are going on in trade policy should really fundamentally feed
through to New Zealand. And I think it's a stretch
(02:06):
to believe that. You know, it's more likely to be
sentiment than it is likely to be a genuine sort
of slow down in the growth story, given the momentum
we think that's there from as I say, interest rates
coming down and the particularly strong rise in dairy exports.
So while we're aware of it and we're watching it
and that it may prove to be that actually things
have weakened a bit, we're not prepared to jump quite
(02:28):
as strongly in that direction just based on one month's reading.
Speaker 1 (02:32):
Now now you've done a comparison between how our economy
is tracking in Australia and to your mind, we're doing
a lot better than Australia. What's going wrong with them?
Speaker 2 (02:41):
Well, the first thing is that part of this story
is purely cyclical. You know, Australia didn't have as big
a slowdown last year, and so we don't think it's
going to get as big a upswing this year. Inflation's
coming down more slowly. New Zealand had a much deeper
downturn last year, and so interest rates have come down
a lot more quickly, and of course you going to
get as a bat on the back of that, we
(03:01):
think a cyclical upswing. Both economies have some structural challenges
and the primary issue there, of course is that productivity
is weak, and that productivity story is constraining growth in
the economy. It's much more prominent in Australia, though. I
think in Australia we've got some really quite dismal productivity outcomes.
So on the last print we got output per hour work,
(03:24):
which is exactly as it sounds. It's how much output,
how much GDP you get for how many hours you
put into the economy was falling by one percent, if
not by one percent over the past year. This is
not a new story. It's been going on for a
while now. But productivity is really quite a big challenge here.
I know it is in New Zealand too, but it's
an even bigger challenge in Australia, and that is presenting
a pretty decent headwind to the pace at which the
(03:46):
Australian economy can grow.
Speaker 1 (03:48):
Why why is it a bigger problem there?
Speaker 2 (03:51):
I think we just haven't done very much reform in
recent years, and that's one of the factors. I mean,
you could say the same about parts of the New
Zealand story too, and you makers need to really focus
on on the reform agenda. I think the other thing
is that we've seen a lot of growth in the
Australian economy over the past couple of years has been
driven by public spending. It's been public demand. In fact,
(04:11):
you know, eighty percent of the growth in the Australian
economy over the past two years has come from public demand,
or three quarters of the job creation has been public
demand as well. Public demand funded, and so those jobs
tend to have lower levels of productivity on average. We're
talking about things that are motionally related to the care economy,
aged care, disability, the disability insurance scheme, the health, the
(04:32):
health side, and these things tend to have lower productivity.
I think if you looked at the comparable numbers for
New Zealand, although public demand's been solid, it hasn't been
nearly as strong as you've seen in Australia. Yeah.
Speaker 1 (04:43):
Interesting that's fascinating. A good news there. Thank you very much, Paul,
appreciate it. Paul Bloxham, HSBC's chief economist.
Speaker 2 (04:50):
For more from Hither Duplessy Alan Drive, listen live to
news Talks it'd be from four pm weekdays, or follow
the podcast on iHeartRadio
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