New Zealand enters its worst recession since Great Depression
New Zealand has plunged into recession for the first time in a decade, forcing Prime Minister Jacinda Ardern to defend her pandemic response ahead of next month’s general election.
The national data agency Stats NZ said the 12.2pc contraction from April to June was “by far the largest” on record, with the country strictly locked down and its borders closed for almost two months. The construction and manufacturing sectors fell particularly sharply.
During the Great Depression, GDP fell 5.3pc in 1931 and a further 7.1pc in 1932, according to academic research.
Ms Ardern rejected opposition accusations that the measures had pushed the economy “off a cliff”, adding that New Zealand’s Covid-19 death toll – 25 out of a population of five million – compared favourably to other nations. Her aim has been to eliminate the virus altogether rather than only to contain its spread.
"Success for me is saving people's lives, supporting and saving people's businesses, coming out the other side faster, quicker and with more activity," she said. "I back our results."
A rebound in the July-September quarter, when restrictions were eased, would follow the economic pain of lockdown in the June quarter, she claimed.
Jarrod Kerr, chief economist at Kiwibank, agreed: “The focus must now turn to the recovery. And the current quarter looks pretty good.”
Ms Ardern’s government has pumped billions of dollars into the economy to sustain activity and minimise unemployment, with net government debt expected to rise from about 20pc of GDP before the pandemic to 54pc of GDP by 2023.
New Zealanders will go to the polls on Oct 17, when Ms Ardern is expected to hold on to her office.
Grant Robertson, the finance minister, said there was “no way any political party could claim that there would not have been a recession in New Zealand” as a result of this “one-in-100-year global economic shock”.
However, Judith Collins, leader of the opposition National Party, said New Zealand’s economic performance compared “very unfavourably” with neighbouring Australia, which recorded a 7pc contraction in the June quarter after adopting a more flexible approach to lockdowns and border controls.
Ben Udy, Australia and New Zealand economist at Capital Economics, said he doubted the Reserve Bank of New Zealand would make any significant policy changes at its next meeting but added that negative interest rates were likely next year, given the central bank is reaching the limits of its asset purchase programme.
