Michael Gordon: Westpac Senior Economist on the latest GDP figures, economy

There’s an expectation that weakness in the last economic quarter is behind the country's slump. 

Stats NZ reports gross domestic product dropped 1% in the September quarter.  

We're now in our deepest recession since the Covid-driven slump of 2020.  

Westpac Senior Economist Michael Gordon told Heather du Plessis-Allan that the grind the country has been experiencing throughout the year is now showing up a bit more fully than in the last GDP numbers. 

He says one thing that stood out was the recognition of the cutbacks in the public sector, which weren’t being fully captured in the figures from three months ago. 

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Episode Transcript

Speaker 1 (00:00):
For the second time this week. We knew that the
data was going to be bad, but we didn't know
it was going to be this bad, did we. The
GDP in the third quarter was down a full percentage point.
That's much worse than the zero point two percent that
was expected the previous quarter. Q two has also been
revised down even further, making this the worst recession that
we've had excluding COVID since nineteen ninety one. West Pax
senior economist Michael Gordon's with us Morning, Michael, Michael, Ye there.

Speaker 2 (00:27):
Yes, good morning, Good morning.

Speaker 1 (00:28):
Hey why was this so much worse? Do you think
than the forecasts?

Speaker 2 (00:32):
It's never one thing that drives it. I think one
thing that did stand out was a little more recognition
of the cutbacks in the public sector, which weren't initially
being fully captured the figures we were looking at three
months ago.

Speaker 1 (00:46):
This does this to some extent, explain what we were
hearing from people out there who were saying, this is
really tough. It's the worst thing we've seen in forty years,
and these figures back it up.

Speaker 2 (00:57):
Yeah. I think it's certainly showing that the the kind
of grind that we've had really through this year is
now showing up a bit more fully than that the
GDP numbers that we saw three months ago. I tend
to think because GDP can be revised a lot, I
tend to say, if you want to know what's going
on in the economy right now, probably best to look

(01:19):
at the jobs numbers, because they're not vulnerable to the
same kind of issues, and they had been telling a
similar story. We did see quite a cutback in jobs
through the middle part of this year, especially, They look
to have stabilized a bit more recently, and we're also
seeing things like business confidence, consumer confidence surveys. People are
feeling a little bit more upbeat.

Speaker 1 (01:37):
Now, how do we explain stats getting the second quarter
figures so badly wrong, going originally saying it was negative
zero point two and now saying it's negative one point one.

Speaker 2 (01:46):
It's a terribly boring explanation. I'm afraid there's a lot
of it came through changes in the way that they
adjust for seasonality in the numbers, So it's really about
it doesn't change the the overall growth rate, it kind
of changes when they think the growth occurred within the year.
I'm not entirely happy with what they've done with it.

(02:08):
To be honest, I think it might be revised again
in the future, up or down. I think probably that
court will go up, others will go down.

Speaker 1 (02:16):
Okay, Now, look, when you look at it broken down
by sector, it feels like some of the stuff that's
happened in Q three or stuff we couldn't have dodged,
like the decline in electricity and gas, and we've got
no control over that. And I guess some of the
decline and manufacturing is related to that. Or am I
being a little too generous here?

Speaker 2 (02:33):
Now? There's always one off things in these numbers that
you sort of look through, and as a full castra
I'm sort of going, well, I know that the hydro
lakes are full now, so I don't think we'll have
the same issues with electricity, but it always happens. I
think if you move through you can see things like
we've seen sectors like construction, manufacturing, retail. You know, they've

(02:53):
kind of been in decline for a while and they're
quite cyclical, quite interestrate sensitive sectors. So I was really
telling a story of we had high into straight for
the last year or so.

Speaker 1 (03:02):
Yeah, Michael, Thanks, it's really good to talk to you.
That's Michael Gordon, Westpac senior economists. Just to give you
some international comparison to understand how badly we're doing. We
went backwards in Q three one percent right negative one.
Australia up zero point three, Canada up zero point three,
China up zero point nine, Japan up zero point three,

(03:23):
Britain up zero point one, United States up zero point seven.
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