Henry Russell: ANZ Economist on the latest GDP figures putting New Zealand into a recession

Stabilising the economy is not as simple as investing more. 

Stats NZ figures out yesterday show GDP fell 1% in the three months to September. 

They also revised the preceding quarter down to 1.1% contraction, with both figures putting us in deep recession. 

ANZ Economist Henry Russell told Andrew Dickens the Government should be investing more, if it weren't dealing with its own deficits. 

He says there is going to be another shock on the horizon and the country needs to be prepared to respond to that. 

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Episode Transcript

Speaker 1 (00:00):
Gdpigures were worse than we thought. It fell by one
percent in the three months ending September to be one
point five percent lower than a year ago. The year
this officially makes it the biggest recession since nineteen ninety one.
The GDP and Q two being revised down. Henry Russell
is the A and Z economist and joins you right
now looking at this car crash, Henry, how did you feel?

Speaker 2 (00:22):
Well? There was certainly some shock factor yesterday when we
saw the numbers. It really is to do with these
large revisions we've seen in the last two quarters, and
as you note, this is now the largest contraction of
six month period going back to nineteen ninety one. That
being said, you know, one might take from that that
things that they're slowdown has certainly been much worse than fared,

(00:45):
but it hasn't necessarily changed our expectation on what lies ahead.
If you think about these data, they cover a period
that finished nearly three months ago. Now, in that time,
the Reserve Bank has delivered one hundred basis points of
cuts and we're seeing signs that the economy is or
responding in high frequency indicators. So the hope is that
this does bring to a close the economy's traveling period

(01:08):
over the past couple of years, and we will see
a return to growth in the coming quarter.

Speaker 1 (01:11):
Should the government be investing more? And I say this
because Cameron bagg We said at the beginning of the week,
you know, they've got to cut their spending, but they've
also got to keep you know, firing on their part
of the economy because they have a responsibility to do that.
And of course the CEE to you, who you know,
left leaning anyway, I say, oh, you should be investing
in during a recession because it's never been cheaper, which
I don't know where they got that from, but whatever.

(01:33):
Should they be continuing to spend, but it's going to
be wise spending.

Speaker 2 (01:37):
I think it is important to note that, you know,
going back to what the Treasury said in the half
year update on Tuesday, the government is running structural fiscal
deficits for as far as the eye can see. And secondly,
the stabilizing stabilizing the economy is not necessarily the role
for government. It is actually the responsibility of the Reserve

(01:59):
Bank through interest rates and the reason and the reserve
banks certainly could cut interest rates further based on the
data yesterday, but there's still some lingering inflation challenges out there.
The Reserve Bank will need to weigh that against design
the economies responding. So while we are traditionally fiscal policy
should be countercyclical in nature, and by that use the

(02:22):
government should be spending during slowdowns or that's traditionally what's happened,
but there's no money left in the kiddy. Essentially, we
do need to go through this period of consolidation because
there is going to be another shock on the horizon
at some point, and if we continue on the path
we're on, we are not going to be able to

(02:44):
respond to that crisis as may be necessary. So there Reserve,
I mean, the government certainly needs to balance both both
sides of that.

Speaker 1 (02:54):
Well said, Henry, enjoy your Christmas as well, Thank you
so much for waking up early for us, and go
well Merry christmasy Man very Christmas.

Speaker 2 (03:02):
Yeah.

Speaker 1 (03:02):
I see that the Bank of England has kept interest
rates the OCR at four point seventy five percent and
the warning of stagflation for England. They are bad. There
are bad economic newses all over the world right now.
There's all sorts of flows. Could there be war, could
there be another earthquake, Could there be all sorts of stuff.
We need to get the house in order, even though
it hurts. I'm sorry. I'm sorry.

Speaker 2 (03:23):
For more from Early Edition with Ryan Bridge.

Speaker 1 (03:26):
Listen live to news Talks it'd be from five am weekdays,
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