Worst GDP contraction

Finance Minister Grant Robertson said GDP statistics showing the largest slump in quarterly GDP since modern records began in 1987 were better than forecast.

Accounts from Stats NZ yesterday showed the economy contracting 12.2 per cent in the June quarter.

‘‘This result was better than the Treasury forecast of 16 per cent released [on Wednesday] and at the lower end of other commentators’ expectations,’’ Robertson said.

Since Covid-19 began, forecasters have consistently ratcheted down their forecasts of how bad the economic effects of the crisis would be.

In May, Treasury had feared the economy would shrink by 23.5 per cent this quarter. On Wednesday, it revised that forecast to 16 per cent.

While the figure was much better than feared, it was still by far the worst quarterly contraction in New Zealand’s recorded history, according to Stats NZ.

‘‘The 12.2 per cent fall in quarterly GDP is by far the largest on record in New Zealand,’’ said Paul Pascoe, Stats NZ’s national accounts senior manager.

The next worst quarter was a 2.4 per cent decline in March 1991.

Robertson said the GDP stats captured the worst of the lockdown, but missed out on some of the more positive data that’s subsequently emerged.

‘‘The June quarter includes almost the entire time New Zealand was in alert level 4, which we moved into on March 26, so this result is not surprising. Going hard and early means that we can come back faster and stronger.

‘‘We already know we have bounced back since the end of June, with the New Zealand activity index in July up two per cent on the same period last year. Electronic card spending was also

11 per cent higher in July than the same period in 2019.’’

National leader Judith Collins and finance spokesperson Paul Goldsmith said the economic pain was worse than it needed to be.

‘‘The lack of pragmatism and a clear plan from Labour has made the economic hole deeper and the impact harder than it needed to be,’’ Goldsmith said.

‘‘This economic damage was recorded in threemonths, but will last for decades to come.

‘‘This is the deepest recession in living memory. It is already having a devastating impact on Kiwi families.’’

Robertson said a large reason New Zealand’s contraction was so big was the relative importance of sectors such as tourism and international education to the economy.

But Collins said the contraction was down to the Government failing to heed economic advice.

‘‘Ultimately, it’s got to be absolutely focused on the economy,’’ Collins said. ‘‘It’s very obvious some of the decisions that are being made at the moment are not reliant on health advice.’’

ACT leader David Seymour said the figures showed the Government had taken an unbalanced approach to Covid-19.

‘‘It’s been too busy lecturing New Zealanders from the podium and hosing money at dubious projects when it should have been asking ‘what economic activity can we safely allow?’,’’ he said.

‘‘We already know we have bounced back since the end of June.’’

Grant Robertson

Minister of Finance