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Slowing GDP: transition or decline?

As New Zealand’s GDP growth slows, Grant Robertson and Amy Adams clash on whether this is sign of "transition" or a symptom of decline

GDP growth is officially slowing. According to figures released by Statistics NZ on Thursday, GDP grew by just 0.5 percent in the March 2018 quarter, slowing from 0.6 percent in each of the previous quarters. 

This number brings annual GDP growth for the year ending March 2018 to 2.7 percent, down from the lofty heights of December 2016, when annual growth hit four percent.

In Parliament on Thursday, Opposition Finance Spokesperson Amy Adams put heat on Finance Minister Grant Robertson over the economy. 

She was particularly critical of the Government’s record on GDP per capita, a measurement of the size of the economy divided by the population, which is meant to approximate each person’s share of the economic growth. 

GDP per capita was flat in the March 2017 quarter, down from a 0.1 increase in the previous quarter.

While in Opposition himself, Robertson frequently lambasted the previous government’s GDP per capita numbers, but now Adams is able to pressure Robertson on why the economy delivered the lowest per capita GDP growth since September 2011. 

Robertson's replies centred around the idea that the economy was in transition. He said 13 of 16 industries grew in the quarter and business investment was up 5.5 percent year-on-year, showing businesses are still investing in the economy. 

“GDP per capita will increase once we move to a more sustainable, more productive, and inclusive economy,” Robertson said. 

An economy in transition, but to what?

Before question time, Robertson told journalists that the numbers were expected and that GDP growth would pick up.

“It was in line with expectations,” Robertson said. 

“Over the forecast period we’ll get to three percent growth, that’s where we’d like to be.”

He said New Zealand was in the midst of a transition. 

“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 more sustainable,” Robertson said. 

But Adams told Newsroom the poor numbers were a reflection of the Government’s poor economic management and showed declining business confidence feeding through into the real economy.

“Both the processes, like the way they made their oil and gas decision, their reluctance to read or even take advice and dismiss advice is worrying,” Adams said.

“The framework around industrial relations, turning off the tap to foreign investors, the noises they’re making around severely limiting immigration could all be a considerable handbrake on the New Zealand economy,” she said. 

The market had projected a slowdown in quarterly GDP growth. ASB, Westpac, and ANZ all projected 0.4 percent growth in the quarter, while the Reserve Bank’s May monetary forecast projected 0.7 percent. 

Middle of the pack

New Zealand is still in the middle of the pack in GDP growth terms.

Australia’s annual GDP growth is 3.1 percent, Canada’s is 2.3, and the Euro area’s is 2.5. Average growth around the OECD is exactly 2.7 percent.

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