Economy gets surprise boost

Statistics New Zealand has found billions of dollars worth of economic activity that it hadn’t previously counted, giving the country’s GDP growth rate a big boost.

The economy grew 0.6 per cent in the final three months before the Labour-NZ First Government took office, but it was the size of Statistics NZ’s revisions to its past estimate of how fast the economy had been growing that surprised banks.

Statistics NZ said GDP growth in the year to September 30 was 3 per cent, using its ‘‘preferred’’ annual average measure.

ANZ said a new benchmarking method adopted by Statistics NZ and other changes meant the economy was now reported to have grown at 3.6 per cent in the year to March 2016 and 3.7 per cent in the year to March 2017, up from 2.4 per cent and 2.9 per cent respectively.

‘‘This paints a vastly different picture with regards to the economy’s recent performance.’’

The revisions to past growth forecasts mean Statistics NZ now believes the economy is significantly larger than it had previously thought, with annual GDP totalling $278 billion.

In June, it had put the value of economy at $268b, with only about $2b of that $10b change coming from growth between the quarters.

Statistics NZ’s national accounts senior manager, Gary Dunnet, explained that the department had increased its estimate of the size of the economy because of new measures.

These indicated firms were receiving more revenue than previously thought, consumers were spending more than previously thought, and the value of unconsented building work – for example, work done following the Canterbury earthquake – was higher than Statistics NZ had previously calculated.

ANZ said Statistics NZ’s ‘‘meaningful upward historical revisions’’ – which put ‘‘year on year’’ GDP growth at 2.7 per cent – painted a picture of an economy that had been performing better than previously thought.

‘‘The question is: Will views on potential growth be revised higher too? We suspect they will be.’’

ASB said the size of Statistics NZ’s recalculations surprised the bank, suggesting the implications might take time to digest.

‘‘ASB [had] been surprised by the persistently weak growth over the past few years despite relatively favourable economic supports, which has led us to challenge our own assumptions on the economy and what that means going forward,’’ the bank said.

‘‘The upward revisions suggest that perhaps we had been on the right track after all.’’

National Party finance spokesman Stephen Joyce said the figures ‘‘finally put to bed the fallacy of a ‘‘productivity recession’’ under the previous Government.

‘‘Stats NZ’s report of 3 per cent growth for the year to September together with upward revisions to recent growth figures paint a clear picture of a strong economy over the last few years,’’ he said.

Economists at Infometrics noted the latest 3 per cent GDP growth figure was down from the revised figure of 4 per cent in the 2016 calendar year, showing growth had definitely slowed over the past year.