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2020 Election: Grant Robertson Rates NZ Record Worst Shrinkage ‘Better Than Forecast’

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

Accounts from Stats NZ on Thursday showed that the economy contracted 12.2 percent in the June quarter.

This result was better than the Treasury forecast of 16 percent issued [on Wednesday] and at the bottom end of other commenters’ expectations, Robertson said.

Ever since the Covid-19 started shaking the New Zealand economy, forecasters have consistently collected their predictions of how bad the economic effects of the crisis would be.

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

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Grant Robertson says GDP shows the worst state of stagnation, but not some more positive signs from behind.

ROBERT KUCHIN / Sende

Grant Robertson says GDP shows the worst state of stagnation, but not some more positive signs from behind.

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

The 12.2 per cent drop in quarterly GDP is by far the largest recorded in New Zealand, said Paul Pascoe, senior account manager at Stats NZs.

The next worst quarter was a 2.4 percent decline recorded in March 1991.

Robertson said GDP statistics caught the worst of the blockade, but lost some of the most positive data that emerged afterwards.

The June quarter covers almost all of the time when New Zealand was at Ready Level 4, to which we moved on March 26, so this result is not surprising. Going strong and early means we can come back faster and stronger. Economists expect the current September quarter to show record growth in the economy, he said.

We already know that we have returned since the end of June, with the New Zealand activity index in July, two percentage points higher than the same period last year. Electronic card spending was also 11 percent higher in July than the same period in 2019.

National leader Judith Collins and finance spokesman Paul Goldsmith said the economic pain was worse than it should have been.

Lack of pragmatism and a clear plan by Labor have made the economic hole deeper and the impact more difficult than it should have been, Goldsmith said.

This economic damage was recorded in three months, 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 one big reason why New Zealand was shrinking so much was the relative importance of sectors such as tourism and international education to the economy.

The contribution of a sector like tourism to New Zealand exports is about double that of the Australian economy, which shrinks 7 percent in the same quarter, Robertson said.

But Collins said the contraction was up to the fact that the government failed to heed economic advice.

After all, we need to focus absolutely on the economy, Collins said.

Obviously it is very clear that some of the decisions that are being made at the moment do not depend on health advice.

Collins said she would have done things differently.

We can say that we would not have stopped the construction industry, we would not have stopped working on the streets, we would not have stopped people building houses, she said.

Goldsmith acknowledged that economies across the globe were risking contractions, but did not say how much he thought a National government could have reduced the economic damage.

All you can do is do your best as a government, Goldsmith said.

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

She has been too busy lecturing New Zealand from the podium and losing money on dubious projects when she should have asked what economic activity can we safely afford? He said.

Seymour said parties should show restraint with spending.

We need to ask what can be done, rather than dictate from the podium what cannot be done, he said.

He said he was concerned that Australia’s relatively stronger performance meant there could be a brain drain when the borders reopened.

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