Brad Olsen: Infometrics Principal Economist on the reports showing NZ's economy is improving

New Zealand's back on the road to financial recovery, according to new reports.

The latest Stats NZ data shows the economy contracted 0.5 percent in the year to September.

But it's grown 1.1 percent - faster than expected - in the last quarter.

Infometrics Principal Economist Brad Olsen says we're effectively returning to where we once were.

"Momentum is starting to build, but it's building from a weak spot. So we're certainly not saying that the economy is completely back, but it is on a better track."

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Episode Transcript

Speaker 1 (00:00):
Quarter three GDP up one point one percent. Nikola Willis
is cracking the champagne a little early for Christmas. A
huge turnaround from the second quarter when the economy shrank
one percent. Looking at the past year, we were were
actually a bit smaller, point four percent smaller than in
the year two September twenty four. Brad Olson, Informetrics principal
economist is with me tonight, Brad, good evening, Good evening.

Speaker 2 (00:23):
A turnaround there, It was quite a turnaround. But you're
right that realistically the economy is still not necessarily been
growing by leaps and bounds. It's more tried to fill
in the hole that we had earlier this year. There
was a little bit more activity at the start of
the year, of course, a bit more of a cratering
in the second quarter, and then abouts back in September.
So that's good and I think probably the most pleasing

(00:45):
part of that result, and I don't want to overreg it,
but you did see that fourteen of the sixteen measured
industries that statsn Z looks at did see an improvement,
so it was a bit more broad based over all
of the figures, which is encouraging, you know, you were
seeing a lift in the likes of manufacturing, you were
seeing more coming through from professional and business services, so
that was encouraging that Again, momentum is starting to build,

(01:07):
but it's building from a weak spot. So we're certainly
not saying that, you know, the economy is completely back,
but it is on a better track.

Speaker 1 (01:14):
And that's the point important point to make, isn't it
that while the numbers, if you look at the number
as a nominal figure, we're growing three times as fast
in this quarter than as the Australians. We're growing as
fast as China in this quarter. But it won't feel
like that because we're coming off a very low base,
well exactly.

Speaker 2 (01:32):
And look if you look at you know, the Australian
figures are compared to where we were, you know, last time,
so you know, New Zealand was down you know, one percent,
whereas the Australians they were still growing. And so if
you sort of look at them all together, they grew
i think, point six percent on the second quarter. We
were down one percent. We've then come back one point

(01:53):
one percent in this quarter they were up point four
So you add them together, we're basically in a pretty
similar position. We just had to go through a world
of pain to sort of get there where they've had
sort of more consistent growth. And that's probably the piece
we're looking for a lot more next year, is can
we just get a bit more consistency. Everyone's asking, of course,
for better economic numbers, and yes, that's totally true, but
you also need a bit more of that consistency before

(02:15):
businesses and households really buy into an economic recovery and say, look,
it's actually happening, happening, I can plan my life around it,
rather than everyone going, well, look it was good now,
but then it might sort of pull back and then
it might be better in the future. That sort of
stop start element of the economy is not helpful going forward,
and so these figures, being broad based, do support a
little bit more of that uptick as we head through

(02:36):
into twenty twenty six rare.

Speaker 1 (02:37):
Do we need to worry too much about Fonterra downgrading
it cutting its forecast? I mean, we know the price
has been dropping on the global dairy trade options, but
do we need to be worried about the fact that
this is coming down? Does that affect the growth for
next year?

Speaker 2 (02:49):
Look, it doesn't make it quite as easy to maintain
that sort of same growth profile. But equally, look, this
has been signaled when Fontira came out with their first
price for the year, they deliberately we had it a
bit more open and sort of signaled the look of
things turned around. Then we could be getting back to
these sort of levels. It's still a decent payout, I mean,
for goodness sake, it's still over nine bucks. That's a

(03:09):
good number, but it does start to again just trim
it a back a bit. And we know that the
primary sector, although they have had more money in recent
times coming through, they haven't necessarily spent it straight away.
So look, you've still seen some good recovery in parts
of provincial and rural New Zealand. But I think it
just goes to show that we sort of can't bank
on any one bit being the silver bullet for economic

(03:30):
growth in the next year. It does have to be
a little bit more across the board, and those global shops,
those global factors that we can't control at home are
still things that we're going to have to watch out for.

Speaker 1 (03:39):
Thank you, Brad Brad Olson in for metrics. They by
the way, the Fonterra price forecast cut from nine point
fifty down to nine dollars their midpoint. And as I said,
the global dairy trade options have been coming down. But
if you look prices down for since the May peak
are down a quarter and Fonterra price now down since

(04:01):
the start of the season ten percent, and supply obviously
has been going up. What does it do to on
farm costs, on farm profits. We'll talk to Jami mckaye,
host of the Country After Six, on that later.

Speaker 2 (04:16):
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