Well, we got the bounce back in the economy - but it was not as strong as economists had expected, which will raise questions about the immediate performance of our economy this year in the face of all manner of challenges including Omicron and the global impact of the invasion of Ukraine.
Statistics New Zealand said GDP grew 3% in the December 2021 quarter. This was a bounce-back from a revised drop of 3.6% in the lockdown-ravaged September quarter. But the bounce was weaker than economists had expected, with most of the major bank economists having expected a rise of 3.5% or more.
However, the 3% rise was stronger than the Reserve Bank had forecast, which was for a rise of just 2.3%, so the latest GDP figures are unlikely to deter the central bank from continuing an expected series of interest rate hikes this year.
ANZ senior economist Miles Workman said the 3% GDP rebound was "solid, but shy of the 3.5% rebound we had pencilled in and certainly not a full recovery to Q2 2021 levels".
"Even looking beyond the near-term wobbles associated with the Omicron outbreak, a rather potent combo of high inflation and rising interest rates (to hopefully contain inflation) is set to erode household incomes from both ends. To prevent a hard landing, a lot depends on the revival of international tourism and education, and the labour market holding it together," Workman said.
ASB economist Nathaniel Keall said the NZ economy’s resilience through the pandemic has been very impressive, "but this quarter’s result isn’t the sort of dramatic overperformance we’ve become used to, and hints at broader headwinds set to deepen".
"...While its pleasing to know that the economy retains its ability to pull off rapid turnarounds, today’s figures are already dated in light of subsequent events. More timely indicators suggest that the outbreak of Omicron in the community during March has reduced mobility and crimped a fair degree of household spending. The upshot is that growth is likely to have moderated, or perhaps even dipped slightly, during the current quarter."
Stats NZ said the services industries led the increase in December 2021 quarter GDP, driven by business services and the retail trade sub-industry within retail trade, accommodation, and restaurants.
The rise in retail trade activity was reflected in higher household consumption expenditure, which increased 5.2%.
- Service industries, which make up about two-thirds of the economy, rose 2.5%.
- Goods-producing industries, which make up about one-fifth of the economy, rose 6.5%.
- Primary industries, which make up the remainder of the economy, fell 2.2%.
“Households spent more on goods and services, particularly on durable items such as clothing and footwear, and electrical appliances,” national accounts – industry & production senior manager Ruvani Ratnayake said.
Goods-producing industries also contributed to the rise in GDP, with manufacturing and construction the main drivers.
“Higher levels of activity were seen in most manufacturing sub-industries. There were notable rises in transport equipment, machinery, and equipment manufacturing; and metal product manufacturing, with higher exports of related products seen in the quarter,” Ratnayake said.
Increased investment in other construction, residential buildings, and non-residential buildings contributed to the higher construction activity in the December 2021 quarter.
Overall, investment in fixed assets rose 11.1%, with strong contributions from transport equipment, and plant, machinery, and equipment investment.
“Growth in imports of capital goods such as transport equipment aligned with the increases seen in investment expenditure,” Ratnayake said.
The December 2021 quarter results reflected the gradual loosening of Covid-19 control measures from the level 4 alert lockdown experienced in the September 2021 quarter. The results also spanned the change in the Covid-19 prevention framework during the December 2021 quarter, from the alert level system to the Covid-19 Protection Framework (traffic light) system.
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Good point - this was discussed on stuff.co.nz yesterday...lowest unemployment but highest welfare in last 5 years.
Yes, and here: New Plymouth food bank staff run off their feet as supplies become stretched | Stuff.co.nz
’We’ve got people who are in paid employment. It’s everybody. People’s hours have been cut, people are off work sick, or they have to stay home and look after the kids, ot their sick leave completely gone, holiday leave gone. Business saying ‘we can’t open this week we don’t have enough staff’.’’
https://www.stuff.co.nz/business/128076279/inland-revenue-to-make-it-ha…
I saw firsthand the increase in tax minimisation structures and subsequent IRD policies to fight these the last time this rate was introduced. A very productive industry.
Income tax law really needs to be rewritten to remove the distinction between revenue and capital income.
ACT has promised tax cuts and more funding for core public services (health, education & training). He is confident this can be fiscally neutral by reprioritising "wasteful" spending.
You could save billions by just forcing departments and agencies to scrap projects that produces less than a cent for every $ spent.
The outcome of the tax changes is not equal in real terms that is for sure. To do that the top tax rate would have to come down only an incredibly tiny (0.01%?).
The impact to tax revenue is even more marked if we consider that the top 4% of tax payers pay 30% of the actual tax.
It is frustrating having to listen to Ardern and Robertson parroting "low unemployment rates" when it clearly is only half of the picture. Every journalist should take them to task when they attempt to mislead with this.
Agreed. Another couple of porkies / half truths they've been telling until recently:
-- Most countries would like to have the economic performance of NZ (whatever this means. 'Most countries' are not comparing themselves to NZ. They're simply to trying to make the best of a difficult situation).
-- Income growth has been outstripping inflation in recent times. Yes, this is no BS. Quote can be attributed to both Ardern and Robbo. They're quoting directly from official data but once again, it's only part of the picture. They're either stupid or being duplicitous.
Still not surprised, judging by having around 20K cases daily and inflation at the moment, this number is still pretty good. 3.5% can happen if we don't have such high case numbers.
Ps: just noticed that the GDP data was for the last quarter of 2021, the case number in the comment here is irrelevant. Please kindly ignore this comment.
the primary industry number is a worry - I suspect not having labour to pick crops is a key issue here , but with consumer confidence and credit card spend plummenting in the last month and a lot of cafes and shops reporting a decrease in sales - the primary industry will need to recover quickly to prevent us moving into a technical recession.
On a nominal basis annual Dec. 21 GDPE grew 7.9997%.
"...While its pleasing to know that the economy retains its ability to pull off rapid turnarounds, today’s figures are already dated in light of subsequent events. More timely indicators suggest that the outbreak of Omicron in the community during March has reduced mobility and crimped a fair degree of household spending. The upshot is that growth is likely to have moderated, or perhaps even dipped slightly, during the current quarter."
I'm not understanding the narrative here - growth moderated or dipped slightly is now an upshot?
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