Robertson: This year is going to be tough

Finance Minister Grant Robertson says a shrinking of the economy in the first quarter of this year is a “sign of the difficult 2022 we are all facing”.

On Thursday, Stats NZ figures showed New Zealand’s GDP fell 0.2 per cent in the March 2022 quarter.

The figure was worse than most economists had forecast — expectations were for zero growth or a slight increase.

Speaking to Mike Hosking on Newstalk ZB, Robertson said the economy going backwards was obviously “not good”.

He said it was a quarter when the Omicron wave had really hit New Zealand and some of the country’s exporting partners were starting to see their growth slow down.

“It’s certainly a sign of the difficult 2022 we are all facing.”

Robertson said typically the first quarter of the year was boosted by tourism but borders were still shut.

“We clearly didn’t have tourists here. We had the red settings in place. That did restrict activity.”

Robertson also pointed to China, where he said the port of Shanghai had been closed for about a third of the year.

“There are real issues for us in terms of our exports and that’s where this came from — you saw a 14 per cent drop in exports in the March quarter,” the Finance Minister said.

He said economists were still expecting there to be positive growth in the June quarter.

The country moved back into the orange setting for the second quarter and some commodity prices rose.

“The economists are still predicting we will see some growth but equally this is a really uncertain and volatile time.”

Robertson said the good news for New Zealand was that it was coming into this time with low unemployment and debt and 5 per cent annual growth.

“This is a challenging time but we are as well positioned as anyone to deal with it.”

Hosking pointed to Australia’s situation as looking better, with lower inflation and a cash rate peaking at a lower level than New Zealand while this country faced an exodus of young people.

Robertson said the forecast was still for a net migration gain.

While there were people who wanted to go on their OE, there were also a lot of others who were interested in coming to New Zealand to work here.

Australia is picking its inflation to reach 7 per cent while New Zealand’s is forecast to peak at 6.9 per cent.

This is a challenging time but we are as well positioned as anyone to deal with it.

Finance Minister

Grant Robertson

Robertson said most people were now predicting inflation to peak in the second quarter just a little above 6.9 per cent.

“Most people are saying, second part of the year it will come off.”

He said Australia had its own share of problems. “They have got a major, major energy issue.”

Economists are picking the second quarter of the year to be positive but for harder times in the second half.

Hosking said he predicted a double-dip recession and asked Robertson if he could rule that out.

The minister said that at present no one was ruling anything in or out.

“The forecasts across the board . . . aren’t predicting a double-dip recession, many of them aren’t even predicting a recession per se.”

He said it was a very uncertain time to be making predictions.

The best thing the Government could do at this stage, said Robertson, was get on with the job of making sure it supported New Zealanders through the situation, and got alongside exporters to address supply chain issues.