Liam Dann: NZ Herald business editor at large on GDP dropping 0.2 percent for the second quarter of 2024

Experts say today's GDP figures paint a dire picture of our economy - and it's unlikely things will recover right away.

New data shows GDP dropped 0.2 percent in the second quarter of 2024.

NZ Herald business editor at large Liam Dann explains why the economy is unlikely to recover in the coming months.

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Episode Transcript

Speaker 1 (00:00):
Kiwi Banks chief economist Jared Kerr reckons the Reserve Bank
needs to speed up the rate cuts to cure our
sick economy. GDP, as we know, went back zero point
two percent in the second quarter of the year, and
per capita we went back two point seven percent year
on year. Liam dan is The Herald's Business editor at
large and with us. Now, Hey, Liam, I'm trying to
find the good stuff in this, because there is actually
good stuff in this, and the good stuff is it's bad,

(00:21):
but not as bad as we thought.

Speaker 2 (00:22):
Yeah, that's right, you'd think. I mean, this is I
feel like we're all pretty down on the economy right now.
There was no way we were going to receive this. Well, yeah,
the per capita stuff's terrible, but all of it was
slightly better than expected. But the response hasn't been a horay,
it's better than expected, and I think it's really oh,
you know, this is grimm and and well it's.

Speaker 1 (00:43):
Like it's like being told you're going to get six
paddles instead of twelve.

Speaker 2 (00:46):
Right, yeah, and then of course they doubt that. Actually
it was a notch worse than the first quarter. So
GDP is a funny thing to count it's a very
difficult thing to count, and it often has revisions, so
you know, this could be revised down, and you had
Olsen saying, well, actually, it could just mean that it's
worse than the third quarter, you know, so that you know,
look any outside there, well it might be you know.

(01:09):
The negative response generally is just that nobody thinks that
it's going to be such good news that the Reserve
Bank stops cutting interest rates. That's going to keep happening.
And then there's a pretty lively debate, as you alluded
to with Jared Kerr and a few other people around
whether they go fifty base and.

Speaker 1 (01:24):
They go in fifty what if the feet can do it,
why can't Well.

Speaker 2 (01:28):
Yeah, we still we don't want to forget about inflation.
That's you know, yes, it still exists. I think they
probably can actually, because I think there's some other things
there that suggest that the economy is going to be
in for a rough ride for for a lot longer.
And that is things like how fast which I think
I talked about last week, how fast immigration is coming off,
and as soon as you have fewer people coming into
the country, it'll solve the per capita GDP problem. Yes,

(01:51):
the mass you're not going to No, No, that's right.

Speaker 1 (01:55):
Tell me, so the triple the triple deprecession is over now,
it's just a double deprecession.

Speaker 2 (01:59):
No, technically, if we're talking about technical recession, where we
go two quarters and the economists are saying, everyone's saying,
don't worry about that, it's all recessionary. But it's the
quarter where in now the third quarter, the reserve banks
thinks that will be negative too, so that the quarter
in this.

Speaker 1 (02:14):
One advise the second recession to not be a recession
because one of the quarters got lifted up.

Speaker 2 (02:19):
Again, I've got marginal about zero. I mean, yeah, okay,
so that's what I think even the economists are saying.

Speaker 1 (02:25):
But let's not talk about that because it's technical. The
fact of the matter is, would you agree with Jared
Kerr that we have basically been in recession for two years?

Speaker 2 (02:32):
Yeah, it feels like recession. It feels like we've been
going backwards for two years. And that's what matters. It's
how people feel about about the economy generally.

Speaker 1 (02:40):
Yeah, you do you want to? I can't believe I'm
doing this to you. You heard the huddle, you heard
Ali's argument about happiness. Explain to me where you stand
on this.

Speaker 2 (02:50):
Yeah. So she had a point that GDP is and everything,
and they have discovered that there's a limit to how
happy GDP can make you. So the richest countries in
the world aren't necessarily the happiest. Yes, certainly, there aren't
many poorer countries. The poorest countries out in the top
of that list, but New Zealand ranks very highly. We're
up near Switzerland in terms of the happiness index. What

(03:12):
happens is that it's just diminishing returns. So if you've
got no TV and you get a TV, you're much
happier than you were. But if you get if you
already have a pretty big TV and you get a
slightly bigger TV, it doesn't make you that much happier.
At least you're a little bit happier. So there's diminishing
returns around happiness, and it really is about the direction
of travel. So the US and China right now they

(03:36):
start going backwards and they feel very unhappy, even though
they're richer than some other countries.

Speaker 1 (03:40):
Because if you have a TV and then you get
a smaller TV, you are not going to be as happy.

Speaker 2 (03:44):
Well, then you're really unhappy, yeah, or you can't go
on holiday this year. So generally we react to the
direction of traveling economy and on that basis, the last
two years have pretty much sucked for New Zealand.

Speaker 1 (03:55):
Yes, very unhappy. Thank you for that.

Speaker 2 (03:57):
Thanks for explaining that to us.

Speaker 1 (03:58):
Liam appreciated, the Herald's business editor at large.

Speaker 2 (04:03):
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Speaker 1 (04:06):
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