30 Mar 2009

New Zealand escapes worst of global recession

7:01 am on 30 March 2009

Despite the New Zealand economy looking miserable, an economist says it is escaping the worst of the global downturn.

Statistics New Zealand figures show gross domestic product declined 0.9% in the last three months of 2008, the biggest quarterly fall in more than 16 years.

Senior economist at UBS Robin Clements says that is a modest contraction compared to some of New Zealand's major trading partners such as the United States which experienced a 1.5% decline in the quarter.

Mr Clements predicts the economy will continue to contract for at least the first half of this year.

GDP fall

The fall in gross domestic product of 0.9% in the last three months of 2008 was the fourth successive quarter of contraction in the New Zealand economy.

The contraction picked up pace in the December quarter, as a fall in manufacturing and construction activity offset a rise in the agriculture sector, led by higher dairy production and government spending.

Household spending remained subdued, as people spent less on cars, furniture, appliances, food and drink.

Business investment also contracted, particularly on plant machinery and equipment, while spending on new housing slumped for the fifth straight quarter.

The global economic slowdown also hurt export volumes, which fell 3%.

On an annual basis, the economy expanded 0.2%, which Statistics New Zealand says is due to the economy growing at a faster rate in 2007 than it contracted last year.

Finance Minister Bill English says the global recession and the previous Labour-led government's damaging economic legacy are responsible for the economy shrinking last year.

Mr English says the Budget on 28 May will set out a responsible and credible plan to increase New Zealand's productivity and incomes.