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Liam Dann: NZ Herald Business Editor on the 0.2% rise in the GDP · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed Be
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  Speaker 2: So, just before the news said that we're technically out
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  Speaker 2: of a recession, that stats New Zealand show GDP grew
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  Speaker 2: zero point two percent in the three months to March,
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  Speaker 2: which followed two consecutive quarterly contractions. A Texas says, we're
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  Speaker 2: still in a recession. Zero point two percent does not
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  Speaker 2: take into account immigration and inflation. It's all good saying
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  Speaker 2: zero point two percent more money was pushed around in
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  Speaker 2: the economy, but there when that money has devalued twenty
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  Speaker 2: percent than the actual meaningful GDP is going down. Thanks
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  Speaker 2: Jasinda and all her sheep, says a Texter. Well, what
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  Speaker 2: does our New Zealand Herald Business editor at large have
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  Speaker 2: to say? From South Liam Dan, good morning.
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  Speaker 3: Yeah, Hi Caerry. I mean I'm afraid I'm not cheering on,
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  Speaker 3: you know, celebrating being out of recession too much either.
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  Speaker 3: To be honest, that per capita thing really is the killer.
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  Speaker 2: And that's what our text would say, is right.
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  Speaker 3: The immigration. So on an annual basis, I think we're
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  Speaker 3: down negative two point four percent on a per capita basis.
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  Speaker 3: So that's you know what you feel, your share as
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  Speaker 3: an individual has gone down six quarters in a row
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  Speaker 3: of negative per capita GDP growth, and this is, yeah, look,
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  Speaker 3: technically a little bit of an upswing, driven weirdly by
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  Speaker 3: things like electricity, gas and water services. So sort of
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  Speaker 3: I guess more output there and you know, higher prices
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  Speaker 3: and all that sort of stuff. But the stuff that
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  Speaker 3: was a downward driver with the things that you see
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  Speaker 3: and you hear about every day, which is construction down
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  Speaker 3: three point one percent, manufacturing down one point two percent.
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  Speaker 3: So so you know that real you know, front end
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  Speaker 3: of the economy still contracting, and I think, to be
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  Speaker 3: rudely honest, I think we're still on for probably a
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  Speaker 3: series of further per capita contractions in the next few quarters,
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  Speaker 3: and possibly, you know, if not back into technical recession,
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  Speaker 3: we could easily see another quarter where we go backwards
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  Speaker 3: because the crunch is really starting to bite, and it's
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  Speaker 3: really starting to bite on interest rates right now, and
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  Speaker 3: so we've seen things like the services sector being hit
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  Speaker 3: very hard in the immediate quarter we're in, and of
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  Speaker 3: course that's what the Reserve Bank needs to see. So
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  Speaker 3: in some ways, this sort of technical bounce out of
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  Speaker 3: recession just just confuses things a bit, and we can't
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  Speaker 3: even claim the good news that we're getting it over
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  Speaker 3: with quicker. So that's cherry.
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  Speaker 2: Sorry, thanks for your but it is actually everything we fared.
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  Speaker 2: This is exactly what you said the worst case scenario
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  Speaker 2: would be, right what we've got ourselves in.
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  Speaker 3: Yeah, the stagflation as well, and I talked about it.
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  Speaker 2: Well, you talked about it years ago.
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  Speaker 3: Yeah, I talked. This columniated on Sunday was actually a
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  Speaker 3: repeatd one, you know.
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  Speaker 2: For us having this conversation that we really wouldn't want
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  Speaker 2: to see precisely what's happening, but.
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  Speaker 3: Look, look for some positivity there. We are sort of
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  Speaker 3: moving still. We're still seeing inflation come out, so I'm
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  Speaker 3: still hopeful that we're not stuck in the kind of
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  Speaker 3: stagflation that we saw in the late seventies because we've
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  Speaker 3: got you know, monetary policy doing the job. It's just
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  Speaker 3: is painful. We've got this non tradable services sector, wages,
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  Speaker 3: all that sort of stuff in the economy staying far
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  Speaker 3: too high. But that is also the part of the
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  Speaker 3: economy that we're seeing come off really fast. So there's
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  Speaker 3: some signs there. You know, we've talked about it before.
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  Speaker 3: There's a big debate about when we might see interstrates
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  Speaker 3: cut and when it all might start to come right.
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  Speaker 3: The Reserve Bank talking very tough and talking about September
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  Speaker 3: twenty twenty five. I think today's GDPs come in line
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  Speaker 3: with their expectations, so they sort of get to hold
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  Speaker 3: the line there. But the consensus of economists is still February.
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  Speaker 3: They feel that it'll you know, it'll stay grim and
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  Speaker 3: it'll turn faster. But I guess I'm you know, we're
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  Speaker 3: talking about a few months inside. But yeah, there's there's
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  Speaker 3: no way around it. You've got to go through it. Unfortunately.
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  Speaker 2: Yeah, you know that things will get better, Things will
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  Speaker 2: get better, things will get better. Like in the scheme
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  Speaker 2: of things, people have been trying to be resilient and
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  Speaker 2: hold on and hope for things to get better for
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  Speaker 2: damn near five years.
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  Speaker 3: Yeah, well, it's a horrible set of circumstances to you
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  Speaker 3: get your pandemic, inflation, then recession. That's that's that's pretty grim.
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  Speaker 3: I again, I don't want to be too negative on
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  Speaker 3: it on a.
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  Speaker 2: On a day where we've got our health, but look.
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  Speaker 3: There's a there's an awful lot of focus on the
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  Speaker 3: cyclical stuff, and I'm I'm I'm actually quite positive about
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  Speaker 3: the cyclical stuff. I know, you know, it feels bad.
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  Speaker 3: Is it going to be February? Is it going to
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  Speaker 3: be you know, would rather it was November. Whatever. That
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  Speaker 3: is turning. That cycle is turning. We're seeing it around
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  Speaker 3: the world. We're seeing at New Zealand that will reach
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  Speaker 3: some sort of rebalancing and hopefully without too much unemployment,
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  Speaker 3: So without unemployment going to record levels or anything like that.
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  Speaker 2: The four percentage four and a half of all take
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  Speaker 2: well as not the worst it's ever been, no.
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  Speaker 3: No, and it may head up to five or five
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  Speaker 3: point five, and that would be around our historical average.
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  Speaker 3: And it feels terrible getting there, and a lot of
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  Speaker 3: people are losing their jobs and that's causing a lot
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  Speaker 3: of stress in the economy as well. But I still
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  Speaker 3: believe quite firmly that we will get through that cyclical piece.
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  Speaker 3: That there is a bigger challenge there and that is
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  Speaker 3: where we get back to some real growth, so we
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  Speaker 3: can you know, getting back to neutral isn't really going
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  Speaker 3: to be good enough. There's some sort of bigger warnings
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  Speaker 3: we've had from like the Fitch Ratings Agency and things
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  Speaker 3: about the big drivers of economic growth in this country
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  Speaker 3: sort of petering out, and so your dairy booms petering
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  Speaker 3: out to chry. You know, we're still selling heaps of
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  Speaker 3: dairy to China. China is still an enormous economy, but
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  Speaker 3: the growth we got from it in the decade before
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  Speaker 3: COVID is not going to be repeated. The growth we
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  Speaker 3: got from tourism, well, you know, tourism getting back to
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  Speaker 3: where we were before COVID, that'll hopefully continue.
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  Speaker 2: Well we're only about eighty percent.
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  Speaker 3: Yeah, that's right, So there's a fair bit of growth there.
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  Speaker 3: But beyond those things, what then drives the New Zealand
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  Speaker 3: economy to create growth for you know, our kids and
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  Speaker 3: all that sort of stuff. And that's a bit of
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  Speaker 3: a missing piece of the puzzle. You know, what's the
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  Speaker 3: next big thing? I know, you know, it's hard to
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  Speaker 3: start worrying about the long term when you're stuck in
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  Speaker 3: the short term grim cycle. But you know, the leavers
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  Speaker 3: are working in this short term cyclical stuff. I think
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  Speaker 3: we can get back to some sort of neutral next year,
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  Speaker 3: but I think, you know, I don't know that we
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  Speaker 3: can afford to wait until everything is sort of magically
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  Speaker 3: imbalanced before we start dealing with those bigger challenges because
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  Speaker 3: you know, actually, if you look at economics, there's always
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  Speaker 3: something a little bit out of whack. So what now
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  Speaker 3: seemed like very stable times pre pandemic, you know, we
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  Speaker 3: were dealing with deflation and you know, low growth, and
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  Speaker 3: you know, there's always something causing an issue. So I
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  Speaker 3: guess there's different parts to it, you know, But what
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  Speaker 3: the economy should be doing is creating a platform with
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  Speaker 3: some opportunity in it for people to take their own chances.
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  Speaker 3: And yeah, I'm hopeful that we'll get through the cycle,
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  Speaker 3: but I'm a little bit concerned about what the drivers
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  Speaker 3: will be from there.
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  Speaker 2: What can people do because it's a recession of two halves.
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  Speaker 2: There's the ones who are clawing from paycheck to paycheck
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  Speaker 2: if they're lucky enough to have one, and then there
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  Speaker 2: are others who have paid off the mortgage and are fine.
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  Speaker 3: Yeah, it's so.
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  Speaker 2: What should both sectors be doing.
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  Speaker 3: Normally you'd say get out and spend. I'm not quite
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  Speaker 3: sure that that's the message right now, you know.
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  Speaker 2: Even for the wealthy.
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  Speaker 3: Yeah, I mean, we don't we want that inflation gone.
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  Speaker 3: There will be there'll be a switch at some point
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  Speaker 3: where we really want you know, those who've got the
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  Speaker 3: mortgage paid off were paid down to get out and spend.
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  Speaker 3: But I guess look, you know, at a micro level,
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  Speaker 3: do go and support your local cafe and support your
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  Speaker 3: local shops and all that sort of stuff that's important,
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  Speaker 3: though we don't because the risk in a recession, the
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  Speaker 3: big risk is in terms of our lifestyles, beyond losing
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  Speaker 3: your job, is that things that we love disappear.
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  Speaker 2: And that's you know, well, yeah, I got some money unexpected,
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  Speaker 2: not a lot, not enough to pay off the mortgage,
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  Speaker 2: but you know, a bit of disposable income. So I
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  Speaker 2: went and got a dress made from a New Zealand
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  Speaker 2: dressmaker who makes dresses here, you know, and and that
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  Speaker 2: that was I needed it for work. But it also
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  Speaker 2: feels good being I'm not buying off bloody team.
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  Speaker 3: And that's and you don't want us to get out
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  Speaker 3: the other side and have lost all these great businesses
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  Speaker 3: that care about because they just didn't make it through,
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  Speaker 3: you know, a recession. Sometimes they talk about sort of
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  Speaker 3: a forest fire thing. You know, it's not quite the same.
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  Speaker 3: You know, the GFC, we had this massive collapse, and
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  Speaker 3: there was a whole bunch of businesses that needed to fail.
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  Speaker 3: And this time it is it is more brutal, it's
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  Speaker 3: sort of it's being engineered. We've got to get back
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  Speaker 3: to neutral, but you know, we don't want to lose
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  Speaker 3: the best of all those businesses while we're you know,
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  Speaker 3: engineering a recession so that you know, and I hear
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  Speaker 3: a lot of people readers and listeners talking about, you know,
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  Speaker 3: how cruel the Reserve Bank is. But that's why I've
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  Speaker 3: sort of written about stagflation getting stuck there as far worse.
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  Speaker 3: And so that's why they're being so tough right now.
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  Speaker 3: They know that you can get stuck in a stagflation
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  Speaker 3: with you know, inflation was to stay above three percent
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  Speaker 3: just persistently, you're just you, and you wouldn't have high
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  Speaker 3: economic growth, you'd have rising unemployment, and you know, the
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  Speaker 3: opportunity really disappears. So I think I've used the band
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  Speaker 3: aid analogy a lot of times. I wish, I wish
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  Speaker 3: in hindsight, we'd gone a bit harder early. I mean,
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  Speaker 3: you know, it was not really even hindsights. Myself and
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  Speaker 3: other people to a greater extent were saying it at
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  Speaker 3: the time.
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  Speaker 2: Yeah, I know. I remember we've had these conversations that
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  Speaker 2: go through and thus it has come to fast.
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  Speaker 3: I was never I was never, you know, opposed to
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  Speaker 3: some stimulus to get us through COVID, but I think
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  Speaker 3: we needed to rebalance faster, and I think we still
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  Speaker 3: need to get there fast because I think the length
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  Speaker 3: of time that this grind is taking is just much
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  Speaker 3: for many people.
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  Speaker 2: It absolutely is. Thank you so much that way, I'm
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  Speaker 2: thanking you, I know, go and peace, I'll say, Liam
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  Speaker 2: dan And New Zealand Herald Business editor at large news
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  Speaker 2: Talk said B. It is eleven eighteen.
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