There is no recession in New Zealand (probably)

GDP figures get released today and as usual, economists have lined up to place their bets. Two quarters of negative growth equals a recession and most think we’ll avoid one, writes Anna Rawhiti-Connell in The Bulletin.

Big range of picks for GDP figures out today 

Sorry about the headline this morning. Whenever I hear the words depression or recession, I end up with a Blam Blam Blam earworm. Maybe finance minister Grant Robertson, a Flying Nun fan, will too after GDP figures are released this morning. Perhaps not, as “There is no depression in New Zealand” was an irony-laden lyric written in 1981 by Richard von Sturmer in response to the “really grey, repressive Muldoon years.” GDP fell 0.2% in the March 2022 quarter. Another fall and by convention, we’d be in a recession. Stuff’s Tom Pullar-Strecker has a good overview on where all the economists are sitting at the moment with predictions ranging from 0.4% to 1.8% growth.

Longer term, growth is forecast to slow

Most economists think we’ll see growth for the June quarter as a kind of bounceback from the omicron wave at the beginning of the year. But all of them talk about “noise” in the data. As Pullar-Strecker reports, most are forecasting that the economy will avoid a technical recession next year, but say a lot depends on whether foreign tourists and students return to New Zealand. Longer term, the consensus (literally, it’s called the Consensus Forecast) is that economic growth is going to slow. The forecast, issued by the NZ Institute of Economic Research, is for 1% GDP growth in 2024 and 1.5% 2025. GDP matters because it’s pegged to government spending. In new budget responsibility rules announced in May, the government has committed to maintaining a small budget surplus in the range of 0 to 2% of GDP over time once we get back to surplus.

This all sounds terrible… is it?

As BusinessDesk’s Pattrick Smellie writes (paywalled), those aren’t spectacular forecasts but at least we’re not in Europe. French president Emmanuel Macron gave a speech two weeks ago where he issued a fairly brutal statement saying that the age of abundance had ended in France. Writing for Newsroom, Jack Santa Barbara praised Macron for his bravery. The speech caused outrage from unions in France who found the implication that millions of low income workers had previously been living in opulence, offensive. It didn’t help Macron that his warning came at the same time as dividends paid out by major French companies reached a record €44b.

More bad news

Some economists argue we should pay less attention to GDP as it masks inequality – with GDP growth, no one can tell if it’s just the rich getting richer. Senators Chuck Schumer and Martin Heinrich are trying to introduce a bill in the US in 2018 to address that masking effect but it looks to have been stuck in the committee stage for four years now. Thankfully, Alice Snedden has a simple answer to sort out wealth inequality. No one who owns property will like it, although some might concede that a capital gains tax is an acceptable halfway point. Finance Minister Grant Robertson still doesn’t think a capital gains tax is politically palatable, defending the government’s “incremental” approach to redistributing wealth when he spoke with Snedden in the first episode of a new season of Bad News.