Are we heading for triple-dip recession? GDP figures will have the answer

Thursday, 19 September 2024

GDP is the last piece of New Zealand's economic puzzle every quarter.

Statistics NZ is set to release GDP figures on Thursday, and any slip into the negative could have the country facing a recession for the third time in less than two years.

The change in GDP or “gross domestic product” is one of the three most-watched statistics produced by Stats NZ every three months, for the quarter prior.

Any fall in GDP in the three months to the end of June, could mean the country was going to experience a “triple-dip” recession, The Post reported.

Last month the Reserve Bank forecast a 0.5% drop in economic activity in the June quarter. A recession is commonly defined as two consecutive declines in GDP.

In the previous quarter, the economy grew 0.2% in the three months to the end of March, so a negative result on Thursday would not show New Zealand was in recession, but potentially heading for one.

Should the economy be in recession again it would be “triple-dip” after negative growth was recorded in the six months to March 2023, and then again during the second half of last year where quarterly drops of 0.3% and 0.1% in GDP were recorded.

The new GDP data will follow hot on the release of New Zealand’s rising current account deficit.

On Wednesday, economists were voicing unease after the country’s current account deficit increased unexpectedly to $7.2 billion in the three months to the end of June, rising by $269m from the March quarter in seasonally-adjusted terms.

GDP is our main measure of economic activity.

The $7.2b quarterly deficit is tipped to put further pressure on the Government to balance its own books, The Post reported.

Prime Minister Christopher Luxon said the deficit was the reason the Government was “out there hustling in the world, making sure we expand trade and double the value of our exports in the next 10 years”.

The current account deficit was essentially the country’s overall ledger with the rest of the world.

Bank economists had been expecting the quarterly current account deficit to shrink further, after peaking at 9.4% of GDP at the end of 2022.

But Stats NZ reported the annual deficit instead remained stuck at 6.7% of GDP, rising slightly to $27.7b in dollar-terms.

An economist has warned the country’s high current account deficit and the Government’s budget deficit were jointly making New Zealand’s strong credit ratings vulnerable to downgrades.

A downgrade to the country’s credit ratings could be expected to put upward pressure on the cost of servicing government and other debt.

However, Finance Minister Nicola Willis said she did not believe the country’s credit ratings were at risk.

Willis announced in the Budget that it was not a given the Government would return to surplus by the year ending June 2028.