‘Cracker’ growth exposes ‘gloom merchants’
Strong economic growth figures have exposed ‘‘gloom merchants’’ trying to talk down business confidence, Council of Trade Unions president Richard Wagstaff says.
Figures released yesterday show the economy bounced back to strong growth in the June quarter, when it expanded by 1 per cent, faster than economists predicted.
Led by dairy production, it was the fastest quarter of growth in two years, although annual growth rose only marginally.
The figures appear to be in stark contrast to the gloom that has hit New Zealand’s business sector, with business confidence at the lowest levels since the economy was last in recession, according to some surveys.
In a statement, Wagstaff said business commentators had tried to darken confidence but were ‘‘out of step with reality’’.
Since the formation of the new Government, ‘‘there has been a carefully co-ordinated campaign from vested interests to talk the business community into depression’’, he said.
The talking down of the economy had reached such a level that some people may have been disappointed by the figures, Wagstaff said.
Economists were surprised by the quarter’s growth, not only because of the overall level, but also because the aspects that had been expected to flatter growth had less impact than predicted, meaning underlying growth may be stronger than believed.
However, there are still expectations that the economy has cooled, with the figures released yesterday covering a period that ended almost three months ago.
Jane Turner, a senior economist at ASB, described the performance of the economy in the June quarter as ‘‘cracker’’, but warned the momentum may not continue into the second half of the year.
‘‘Alas, looking ahead, growth may have lost some momentum over [the September quarter],’’ Turner said.
‘‘Negative business sentiment poses a threat to economic growth sustaining at current rates over the coming year.’’
Growth in the June quarter was twice the pace of an unexpectedly weak first three months of the year, with annual growth increasing to 2.8 per cent.
The New Zealand dollar jumped on the news, as traders took bets that the Reserve Bank was less likely to cut interest rates in the short term than previously thought.
Statistics New Zealand said the growth was broad-based across the economy, with 15 of the 16 categories it bases calculations on expanding in the quarter.
Agriculture, forestry and fishing led the growth, up 4.1 per cent in the quarter, bouncing back after a slow start to the year.
The mining sector contracted sharply, hit by an unexpected outage at a major oil field. As a sector, mining dropped by 20 per cent, the largest quarterly fall in almost 30 years.
Yesterday’s figures are welcome news for the Government, which is relying on Treasury forecasts for consistent and healthy growth to meet its spending promises while also cutting debt as a share of the economy.
‘‘These are very solid figures for the quarter,’’ Finance Minister Grant Robertson said.
‘‘The really pleasing thing is it’s broad-based growth across most sectors.’’
On a per-capita basis – meaning how much growth New Zealand is experiencing adjusted for population growth – the economy grew by 0.7 per cent in the year to June 30.
After climbing to 2.2 per cent in 2015, growth per capita has been falling ever since.
The National Party’s finance spokeswoman, Amy Adams, said the Government’s claim that it wasn’t relying on population growth to underpin economic growth was a ‘‘fallacy’’.
Annual growth per capita was ‘‘significantly below’’ the 1.6 per cent New Zealand had averaged since 2012, Adams said.