Mary Jo Vergara: Kiwibank Senior Economist ahead of the third quarter GDP release

Infrastructure investment is being held up as being paramount to keeping New Zealand's economy on the right track. 

Stats NZ will release GDP data for the third quarter just before 11am today. 

The major banks are all predicting between a 0.2% and 0.4% contraction, meaning our third technical recession in two years. 

Kiwibank Senior Economist Mary Jo Vergara told Andrew Dickens a lack of infrastructure investment has made the last few years particularly volatile.  

She says in a time of recession, building roads, hospitals and schools will help the economy. 

Vergara says cuts to the US Federal Reserve also impact our economy and exporters. 

She says our small economy is heavily reliant on the performance of the global economy. 

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Episode Transcript

Speaker 1 (00:00):
Continuing this week's economic theme of dark economic times. GDP
numbers are out later this morning. Not expected to be good.
All of our banks are expecting are economy contracted in
Q three by about point three down to point four,
which is er point three to point four percent, which
would put the country back into a recession for the
I don't know third time. I'm not sure. Mary Joe

(00:22):
Vagara is Vigarda is the KII Bank senior economist and
joins you, Now, how are Mary.

Speaker 2 (00:26):
Joe Modernna, how are you?

Speaker 1 (00:28):
I'm good? What do you reckon? Is it going to be?
Is it going to be another recession?

Speaker 2 (00:32):
That is what we're We're picking a return to a
technical recession. So that would be a point three percent
contraction over the September quarter that follows another contraction over journey.

Speaker 1 (00:43):
You know, yesterday when we had all this dismal news
out of Hayefu, there were two types of people that
we talked to. One are going, yeah, well, times are tough,
but there are green sprouts in the economy. You know,
they had some optimism and there is others that went, well,
we'll be paying for this by our children and our
children's children and their children's children and we're down the
good good Where do you stand?

Speaker 2 (01:02):
I think for the economy, next year should be a
better year. So we're a bit more optimistic. But you know,
you say it's optimus bracket, it's just realistic. We've been
in a recession for the last two years, especially on
a per capita basis. But where there's a bank now
cutting interest rates, that should you know, start to see
growth return in the second half of next year in

(01:22):
terms of the you know, fisc outlook at words to
perirade it. And that's just following the pattern of what
we've seen in the last few years.

Speaker 1 (01:30):
What about international pressures, because the fairs are picking to
they're going to be cutting the rates. It sounds like
as well, could that help us?

Speaker 2 (01:38):
Yeah, when the global economy improves, we do too. We're
a small locan economy, so we're heavily reliant on what
happens overseas. So when that starts to pick up, which
we do expect next year, that's another reason why we
expect cloth in New Zealand to pick up as well.
Obviously it helps our exporters in that regards.

Speaker 1 (01:57):
What about the issue of productivity, I mean, while we
all blame the government for where we are at. Private
debt far exceeds in public and government debt. And we are,
of course the business community, and it's up to us
to actually get our productivity up. How can we do this?
How can we help?

Speaker 2 (02:14):
Oh, it's definitely just an infrastructure story. We've just under
arrested an infrastructure for I don't even know how long,
and that has been you know, harboring our productivity. We
really need to lift that. It's part of the reason
why we've had recession so tough. Yes, we've imployed a
lot of people, but our layer productivity is very poor.
That's part of the reason why we've had such a

(02:36):
volatile a few years.

Speaker 1 (02:38):
And is government the cutting of government spending Is that
a silver bullet or do we need much more, much
more weapons in our arsenal?

Speaker 2 (02:47):
Yeah? I think government spending it needs to be directed
into that productivity space, into that infrastructure, you know, building
new roads, building hospitals and schools and all of that.
That'll I think in a time of recession you need
the government to kind of come in and boost boost
the economy. And cutting and cutting spending it kind of

(03:10):
just makes the situation bit worse.

Speaker 1 (03:12):
Yeah, thank you so much, Marry Joe Vagada. And that's
pretty similar to what Cameron Vagri said at the beginning
of the week and said, yes, we do have to
cut government spending, but at the same time we also
have to invest. The government has to invest. It's a
big player. Look at the construction industry. You know, they
invest in school buildings and hospitals, et cetera, and then
that money ends out in the hands of the construction industry.
Look what's happened to the construction industry as we've cut

(03:35):
down on that construction from the government money. So everything
is into LinkedIn, everything is intertied. For more from Early
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