New Zealand’s economy grew by a whisker under 3% last year as GDP data for the fourth quarter of 2017 came in under market expectations – the growth figure is more than 1% off 2016’s figure

New Zealand’s economy grew by a whisker under 3% last year as GDP data for the fourth quarter of 2017 came in under market expectations – the growth figure is more than 1% off 2016’s figure

Economic growth for the fourth quarter of last year has come in under market expectations after hot and dry weather played on the agricultural sector.

The average market expectation for GDP growth in the final three months of 2017 was 0.8%, but figures from Statistics New Zealand put growth at 0.6%.

Economic growth for the year was 2.9%, down 1.1% on the year prior.

The size of the economy in current prices was $283 billion.

“The New Zealand economy appears to have lost some momentum over the course of the last year,” Westpac says in an economic note.

“Since population growth was about the same in both years, this represents a marked slowdown in per-capita GDP growth.”

GDP per capita is down on the September quarter, coming in at just 0.1% growth, compared to 0.2% in the quarter before.

Westpac expects growth to remain at a more subdued pace this year, as the new Government’s policies – particularly around cooling the housing market – are expected to be a drag on activity on balance.

“The effects of higher fiscal spending are more likely to be felt in 2019 and beyond.”

ANZ senior economist Phil Borkin says although the economy is not firing on all cylinders, it’s not “rolling over to any worrying degree.”

“At this point in the cycle, that is nothing to be scoffed at.”

New Zealand is in what economists have called the tail-end of its economic cycle.

In terms of monetary policy implications, Kiwibank Senior Economist Jeremy Couchman says the numbers won’t worry the Reserve Bank, as it remains in line with the central bank’s view that the economy is growing near trend. 

Kiwibank is expecting the official cash rate to rise in May of 2019 – the most hawkish pick in the market.

Digging into the data

Although the service sector was relatively healthy over the quarter, its impact on overall growth was tempered by issues in the primary sector.

Hot, dry weather appeared to have a negative impact this quarter on agriculture production, which fell 2%.

“Falling milk production was reflected in lower dairy manufacturing and dairy exports. In contrast, meat manufacturing was up, keeping pace with export demand for meat products,” says National Accounts Senior Manager Gary Dunnet.

Household spending was up 1.2%, accounting for $160 billion (56%) of annual GDP.

This was influenced by people eating out more and spending more on groceries and alcohol.

This was reflected in the retail trade and accommodation industry, with activity in food and beverage services and supermarkets increasing.

Meanwhile, imports of capital goods such as aircraft, factory equipment, and ICT increased considerably this quarter.

“This was reflected in a 2.1% rise in investment of fixed assets,” Dunnet says.

The kiwi dollar fell by 0.25c against the US dollar after the data was released.

Economic growth

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Labour's response:

We are glad to see a more sustainable GDP growth rate, which reflects our economic structure starts to transform to a high tech, high skill, and environment friendly economy under our leadership.


Nats**dy Labours fault we had a warm dry summer....
Average weekly paid hours December quarter were up 0.1% same as GDP per capita growth.
I agree with Labour - zero productivity growth is the perfect sign of an economy moving towards high tech, high skill industries.

@Advisor ........... I gave you a thumbs up for an excellent sense of humour

It was supposed to be sarcastic, boatman. Our flat-lining productivity and worsening skill shortages in high value industries despite record migration are clear indicators that the claims of NZ moving to a high tech economy are absolutely BS!

... whilst you guys are nutting out NZ's hi-tech economy problems ... how about heading off to Horks Bay and picking some apples ...

Hi tech business , apples !


GDP per capita is down on the September quarter, coming in at just 0.1% growth
So much for the "high-skilled" migration contributing to a growing economy and National and Labour's inability to turn the tap off or slow it down considerably.

Actually that's a fairly impressive out come considering how much the retail property market has plateaued, now that we're supporting actual economies rather than feeding the false economy via continuing to over bloating property prices.

See I told you that a Labour Goverment would cock -it -up , they cannot even sustain previous modest growth levels.

This is just the slow start of a slippery slope

We really need that Vote of No Confidence in Parliament to bring down this shaky Government as soon as possible .

I'm beginning to think that you and The Man 2 are the same person.

Isn't a recession caused by pessimistic thinking of society about the future prospects of the economy/country?

And you're being pessimistic so in theory you and the anti-Labour cohort could be the cause of any recession and not the party that is in power?

You'll blame the party in power, when it's actually simply in your head...i.e. the psychology of the situation and nothing to do with the governance.

A good head of steam to come with all that government spending about to go into the boiler. Then again steam doesn’t last long when it gets out does it.

Is this some kind of humor?

Name 1 thing that has changed under this government that has materially affected you or the economy. I can't think of anything that is different from the previous lot apart from a number of committees and strategy groups.

Actually I can - they acknowledge we face issues with water quality, housing affordability & productivity. The new National B-Team are still continuing the mantra of "nothing to see here, we left the country perfect" and because of that they will lose again in 3 years.

Steve Keen's view that decelerating private credit levels lead to slow down in economic growth? Households just aren't borrowing as much to keep the show on the road? Combined with excessive government parsimony....

That is my understanding, yes. Also, worse it can causes instability and really bad events.

Further I heard a comment by Mark Blyth that Spain is now growing again, helped by 5% Govn deficit spending.

So in real world tests not only does austerity not provide the promised growth, and in fact collapses an economy spending actually promotes growth, who would have known?. Oh wait basic Keynesian economics being proven it seems.

Of course! There will be no GDP growth if the government continues on sucking surpluses out of the economy in our own version of mini austerity. The private sector is at peak household debt and the current account deficit isn't disappearing any time soon. If the private debt growth slows down so will growth.

I note Greece isn't allowed to grow like Spain. No deficits allowed for them. And they wonder why the EU is falling apart. Italy is well on the road....

I recommend "And the Weak Suffer What They Must?", for a good read on the Euro Zone, post WW2 economic setup, and Greece's demise.

I was not expecting it to be a good book, assuming as I was that the author - the Greek Finance Minister of five months - would be merely a fellow who wanted Greece to be able to spend whatever it wanted through more and more debt. But it's a great read, a really good analysis of European financial dynamics.

I don't normally enjoy books on finance as much, actually (most of them admittedly having been text books).

Varoufakis is one of the world's great intellects and I have no idea why NZ Labour doesn't get him out to talk about the future of progressive economics. I follow anything and everything he says and writes.
Varoufakis vs the great minds of Cullen and Robertson. No contest I'm afraid.

Talking to my daughter about the economy - another recent book by Varoufakis - is also fabulous.

Have seen that but haven't read it yet. Partner gets a bit tut-tutty if I keep buying more books when I haven't read the ones I already have.

um he first sentence makes no sense. a) this Govn has not been reducing it spending, if anything its the reverse, if modestly. b) the Govn is taxing no higher as a % than the last Govn so hardly sucking out surpluses.

The private sector has chosen to go to this level of debt, this was free choice, are you saying it shouldnt be allowed? Not a vote winner that one whatever its sense. Meanwhile, me I am almost debt free, yeah! Yes, when this implodes there will be a lot of unhappy people but basically done with their own foolishness.

Not sure about Greece not being allowed to grow,

2% isnt that bad.

v spain at 3%

0.1% per capita. How much of this is simply from private debt? What a pathetic result.

The politicians told us the immigrants were highly skilled rocket surgeons.

Can I be the first to say, interest rates lower for longer.

or perhaps "deflation'

I still consider that the biggest risk and the most likely outcome.

so Steven, is a simple choice of lifting interest rates, exposing poor investment, recession correction and back on deck in a few years or keeping interest rates low, no growth no restructure, oppressive debt, no opportunity, listless hopelessness?

If that's how you view it I guess so. My view is you are making a lot of assumptions that are not only dubious but carry significant risk of huge impact if wrong.

eg you assume a raise in interest rates will only cause a recession and not actually a depression as bad as the 1930s. So you are prepared to to the risk of inflicting that degree of misery?

What poor investment is there? from what I can see business is not investing. It is either dangerously broke like many small SMEs, or a big player sitting on huge piles of cash. ie this isnt the middle of a boom.

No growth, just about everything I read is that growth comes from people spending and growing inequality reduces growth so raising interest rates will compound that effect.

"Oppressive debt"? one man's debt is another man's savings well much of it is held by pension funds, wipe out businesses who default on the debt and the pension funds (who are already struggling) fail to pay.

"No opportunity", yes we have been on a grow for ever paradigm on a finite planet, it had to stop sooner or later the later is here.

"hopelessness" you have not seen anything yet IMHO, try studying the Great Depression's effects on ppl.

Which brings me full circle back to "simple choice"

The GDP figure by itself is not just useless-but positively misleading. The GDP per capita figure is significantly more revealing on the true state of the economy.Of course,this government is no better than the National government in seeking to hide the true growth rate-which is pretty dismal.
A further step to make the overall picture clearer would be to have a figure for Net Domestic Product(NDP). This would tell us about the stock of national wealth. NDP is calculated by subtracting the depreciation of capital goods such as roads and housing from GDP. Thus, if the nation is adding to its capital stock,NDP rises and if not,it falls.
This figure is calculated by the US Bureau of Economic Analysis and its former number 2 for many years,Brent Moulton,believes that it should be given much greater prominence. "One of the fundamental questions about a nation is;is its wealth growing or shrinking?"
NZ is now finding out the hard way that our national stock of wealth-our infrastructure-has been declining for a long time and the price of fixing it will be high.
The case can be made that the figure for GDP should be tweaked in other ways too. We should know whether inequality of both income and assets is rising or falling;the same goes for the country's wellbeing(yes,it can be done,see the Maryland Genuine Progress Indicator) and finally,our CO2 equivalent emissions-are they rising or falling?

New Zealand remains a happy place. Immigrants who come here are even happier apparently. Fifth happiest foreign born people and eighth happiest native born people in the world.

Do our mental health and suicide stats really backup that position?

Really exposes the "population ponzi" nature of our growth. Can Labour/NZF just turn off the immigration tap please, as they promised to? It's not doing anything for the economic wellbeing of existing New Zealanders.

Just remember that the current Labour fiscal plan assumes annual GDP growth in the 5% range as per the fiscal plan on the Labour website. This assumption was incorrect when published, and is becoming more demonstrably flawed as time passes. Expect tax hikes as well as increasing deficit financing in the near future.

Taxinda gave us a hall pass on new taxes until they put it to the country in the next election. Maybe another back track? I hope not. Everytime I read about Shane Jones I have images of a drunken sailor on shore leave, except he’s spending my money, not his own.

Not Labours figures, but 5% as promised by Treasury, pigs might fly I'll add.

It is indeed going to be tough for Labour, huge expectations they will spend and equally huge that no one will pay a cent more tax to fund it. Meanwhile National debt will not only not increase but I think from memory actually decrease (34%? to 20%?) How they do this then will be utter magic, or a failure.

The estimated numbers in the Labour Fiscal Plan are wholly owned and generated by Labour and are not at all the same as what Treasury estimated. The Treasury fiscal growth estimates are more modest, as per the ~3% number found in the 2017 PREFU. Labour put their proverbial thumb on the butchers scale when doing their fiscal forecast, as is quietly shown on the very last page of their fiscal plan as shown on their website.

Links for those that want to validate my statements: click on link at bottom, go to last page look at exec summary for gdp growth estimates

progressive labour. really? I would have said quite the opposite - backward. which is the way economic activity is heading. Only taken them 3 months to show how ignorant they are on economic matters. Or worse still - clueless.