Finance Minister says economy 'transforming' as economic growth lags population increase

Thursday, 21 June 2018

Finance Minister Grant Robertson says the economy is in 'transition' as new figures show the economy is barely growing at the same speed as the population.

On Thursday Statistics New Zealand said the economy expanded by 0.5 per cent in the first three months of 2017. Annual growth dipped to 2.7 per cent, the slowest since late 2014 and the fifth straight quarter of decline from a peak of 4 per cent in 2016.

During the same period the New Zealand population grew by 0.6 per cent, with the Government's opponents pointing that growth per capita was going backwards.

'This is a transition from an economy based on population growth and speculation in the housing market, to one where we're more productive and sustainable,' Robertson told reporters in Parliament.

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'That will take some time.'

Thursday's figures were largely anticipated by bank economists, which have warned the economy is slowing. The New Zealand dollar was little changed after the figures were released.

'The New Zealand economy has lost some momentum in recent times, with growth in the last three quarters matching or barely exceeding population growth,' Westpac senior economist Michael Gordon said.

'We have been anticipating a period of subdued growth through the first half of this year, reflecting businesses' uncertainty about the new Government's policies. However, increased fiscal spending should provide a boost to activity from the second half of this year onwards.'

According to figures provided by Statistics NZ, the New Zealand economy is growing at the same rate as the OECD average on an annual basis, slightly stronger than Europe but weaker than Australia and the United States.

Amy Adams, National's finance spokeswoman, said the New Zealand economy was slowing as the world economy was picking up speed.

'These disappointing GDP figures come on the back of business confidence falling, businesses' view of their own activity declining, and consumer confidence deteriorating,' Adams said.

'Together, this is a clear warning sign for the Government. Yet so far the Government is showing no concern about slowing growth and plummeting confidence.'

Anabel Soto from Spain photographs the scenery near Tekapo. Economists warn the tourism industry, one of the main drivers of the economy in recent years, is facing capacity constraints.

Of the 16 sub-categories which make up the GDP measure, 13 grew during the quarter, led by business services and telecommunications.

This was partly offset by a sharp slowdown in construction activity, which dropped by a full percentage point. Part of the fall related to a slowdown in work to repair transport links damaged in the Kaikōura earthquake.

Agriculture production bounced back slightly, up 0.4 per cent, on stronger milk production.

Household spending was flat, although Statistics NZ said spending was held back by a lack of second hand cars available for sale as a result of the discovery of stink bugs in car shipments at the start of the year.

Economists have warned that a cooling in the economy, combined with flagging business confidence, risked causing a further general slowdown, even though the overall picture for the economy was positive.

'Our fundamentals are actually quite strong, so there is a risk that businesses talk themselves into weaker growth and it becomes a self-fulfilling prophesy, when they invest less and employ less and demand falls,' ASB senior economist Jane Turner said on June 15.