September 17, 2025 • 3 mins
Many are predicting a fall in GDP for quarter two.
Stats NZ will release the figures later this morning, just before 11am.
The Reserve Bank expects a 0.3% drop while bank economists are more pessimistic.
Westpac Senior Economist Michael Gordon told Mike Hosking there are worrying trends.
He says the construction sector is still in a downturn, while manufacturing has seen a fall after a decent first quarter.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
So the New Zealand economy is that stood in the
months of April, May and June, otherwise known as Q two.
Everyone thinks that went backwards. Of course, the RB thinks
zero point three. The key to optimism is that as
bad as it got, in other words, as the current
quarter on the right direction. Michael Gordon, where's packs sing
your economists back with us? Michael morning, good morning. You're
minus what minus point four for us? So what are
(00:20):
you looking at? Construction, manufacturing, those sort of areas.
Speaker 2 (00:23):
Yeah, I mean there's some areas like construction has been
in a downturn for a while. Manufacturing is a bit
more of a reversal from what was actually a decent
Q one. The big thing that in there, though, is
that we're finding at the moment the GDP numbers are
not really fully capturing the effects of winter or summer
(00:43):
for that matter. So there's a little bit of a
distortion that's slightly to cause that number to be negative.
But even without that, it's probably more like a true
picture of a very small.
Speaker 1 (00:52):
Plus something better in Q three or not.
Speaker 2 (00:55):
I think things are tracking better in Q three certainly,
and that kind of sit with the idea that as
interest rates are flowing through. It's really only in the
last few months we've really seeing substantial numbers of people
going from higher morgadrats to lower ones, and it's putting
a bit more money in people's pockets that will eventually
flow out to other parts of the economy.
Speaker 1 (01:14):
And are you saying that as an economist, as a theorist,
or are you actually at the bank materially seeing that,
because we've been saying that all of twenty twenty five.
Speaker 2 (01:24):
I mean, we're certainly seeing on the books in terms
of what rates people are paying, in terms of seeing
what they do with it, I mean, inevitably it's going
to be a combination of maybe some paying down debt,
maybe a bit of saving as well as spending. But
that tends to happen in every cycle, so we're not
counting on the idea that everyone's going to spend all
that money that they're saving on interest.
Speaker 1 (01:45):
I read an article the other day that said this
interest rate thing has been overstated. In other words, from
the Reserve Bank's point of view, they keep saying, oh,
look we've cut here and there and everywhere, and that
will flow through. That's been overstated. Is there something in that,
do you.
Speaker 2 (01:57):
Think, I mean, I think there's a pretty high hurdle
to making those kind of claims, just because again, this
happens every time around, and it's usually you know, we're
a year into an easing or a tightening cycle. Then
you get the people emerging starting to say things are different,
the economy's broken. Interest rates don't work. A year further
down the track, we usually find that they had worked.
Speaker 1 (02:16):
Yeah, consumer, the mood that came out yesterday was still
in the in the negative. How much of that is
we've decided it's psychological. We've just decided things are stuffed
versus it actually being stuffed.
Speaker 2 (02:28):
I think there is a psychological element, certainly. I mean one,
I mean, one thing that does cut up in any
conversation really is just this perception of the cost of
living crisis. Now we're kind of we're back to below
three percent inflation, so technicals was on target, but I
think there's still a perception that the cost of living
is just moving out of control. You get things like
(02:49):
food prices, electricity prices, and so on, the really visible stuff,
and that is just continuing to sour the mood.
Speaker 1 (02:56):
But explain to me, just before the News. I gave
the numbers from Walkland Airport. There will be a million
people through these school holidays. A million people are flying.
They're going to America, they're going to China, they're going
to Fiji, they're going to Australia. So what's real.
Speaker 2 (03:09):
Well, yeah, I mean, like I said, it's a multi
speed economy to some extent. But also I think it
flits the fact that, yeah, I mean people are spending,
they're just not necessarily spending here. And yeah, I mean
the travel numbers have been notable, and I think also
the exchange rate has been quite favorable for us compared
to the last couple of years.
Speaker 1 (03:29):
Good stuff, Michael, appreciate it very much. Michael good and
Westpac senior economist. I'm going to Los Angeles and I'm
going to mine about the price of butter. For more
from the Mic Asking Breakfast, listen live to news talks
that'd be from six am weekdays, or follow the podcast
on iHeartRadio.
So the New Zealand economy is that stood in the
months of April, May and June, otherwise known as Q two.
Everyone thinks that went backwards. Of course, the RB thinks
zero point three. The key to optimism is that as
bad as it got, in other words, as the current
quarter on the right direction. Michael Gordon, where's packs sing
your economists back with us? Michael morning, good morning. You're
minus what minus point four for us? So what are
(00:20):
you looking at? Construction, manufacturing, those sort of areas.
Speaker 2 (00:23):
Yeah, I mean there's some areas like construction has been
in a downturn for a while. Manufacturing is a bit
more of a reversal from what was actually a decent
Q one. The big thing that in there, though, is
that we're finding at the moment the GDP numbers are
not really fully capturing the effects of winter or summer
(00:43):
for that matter. So there's a little bit of a
distortion that's slightly to cause that number to be negative.
But even without that, it's probably more like a true
picture of a very small.
Speaker 1 (00:52):
Plus something better in Q three or not.
Speaker 2 (00:55):
I think things are tracking better in Q three certainly,
and that kind of sit with the idea that as
interest rates are flowing through. It's really only in the
last few months we've really seeing substantial numbers of people
going from higher morgadrats to lower ones, and it's putting
a bit more money in people's pockets that will eventually
flow out to other parts of the economy.
Speaker 1 (01:14):
And are you saying that as an economist, as a theorist,
or are you actually at the bank materially seeing that,
because we've been saying that all of twenty twenty five.
Speaker 2 (01:24):
I mean, we're certainly seeing on the books in terms
of what rates people are paying, in terms of seeing
what they do with it, I mean, inevitably it's going
to be a combination of maybe some paying down debt,
maybe a bit of saving as well as spending. But
that tends to happen in every cycle, so we're not
counting on the idea that everyone's going to spend all
that money that they're saving on interest.
Speaker 1 (01:45):
I read an article the other day that said this
interest rate thing has been overstated. In other words, from
the Reserve Bank's point of view, they keep saying, oh,
look we've cut here and there and everywhere, and that
will flow through. That's been overstated. Is there something in that,
do you.
Speaker 2 (01:57):
Think, I mean, I think there's a pretty high hurdle
to making those kind of claims, just because again, this
happens every time around, and it's usually you know, we're
a year into an easing or a tightening cycle. Then
you get the people emerging starting to say things are different,
the economy's broken. Interest rates don't work. A year further
down the track, we usually find that they had worked.
Speaker 1 (02:16):
Yeah, consumer, the mood that came out yesterday was still
in the in the negative. How much of that is
we've decided it's psychological. We've just decided things are stuffed
versus it actually being stuffed.
Speaker 2 (02:28):
I think there is a psychological element, certainly. I mean one,
I mean, one thing that does cut up in any
conversation really is just this perception of the cost of
living crisis. Now we're kind of we're back to below
three percent inflation, so technicals was on target, but I
think there's still a perception that the cost of living
is just moving out of control. You get things like
(02:49):
food prices, electricity prices, and so on, the really visible stuff,
and that is just continuing to sour the mood.
Speaker 1 (02:56):
But explain to me, just before the News. I gave
the numbers from Walkland Airport. There will be a million
people through these school holidays. A million people are flying.
They're going to America, they're going to China, they're going
to Fiji, they're going to Australia. So what's real.
Speaker 2 (03:09):
Well, yeah, I mean, like I said, it's a multi
speed economy to some extent. But also I think it
flits the fact that, yeah, I mean people are spending,
they're just not necessarily spending here. And yeah, I mean
the travel numbers have been notable, and I think also
the exchange rate has been quite favorable for us compared
to the last couple of years.
Speaker 1 (03:29):
Good stuff, Michael, appreciate it very much. Michael good and
Westpac senior economist. I'm going to Los Angeles and I'm
going to mine about the price of butter. For more
from the Mic Asking Breakfast, listen live to news talks
that'd be from six am weekdays, or follow the podcast
on iHeartRadio.
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