23 Sep 2009

NZ officially out of recession

10:10 pm on 23 September 2009

New Zealand is officially out of recession, with latest figures showing the economy expanded 0.1% in the June quarter, ending 15 months of economic decline.

The slight expansion in the economy was driven by an 8% jump in log exports, according to Statistics New Zealand.

The New Zealand dollar surged 1 cent against the Greenback to a 14-month high of US73.15c on Wednesday, prompting fears that the recovery may not last long.

Manufacturing and construction were down during the June quarter while service industries were stable, despite a big increase in services related to the sale of houses.

Electricity production increased on account of the cold winter and manufacturing posted its smallest decline in a year. Spending by Government fell for the first time in five years.

Prime Minister John Key was upbeat about the economy on Wednesday, saying the slight expansion in GDP figures follows other strong economic indicators.

Mr Key says the increase in Fonterra milk payments and a narrowing of the current account deficit are other positive signs.

He thinks that will translate to lower unemployment figures than the 30,000 job losses predicted still to come, with the Reserve Bank now believing unemployment will peak at 6.8%.

Mr Key suggested international credit agency Fitch might want to take New Zealand off its negative watch.

The expansion has surprised economists, most of whom had picked the economy to contract by 0.2%.

BNZ economist Stephen Toplis says the economy will continue to expand, while ASB economist Jane Turner believes the recovery remains weak and the economy could contract again as unemployment rises.

Exporter not expecting big turnaround

One of New Zealand's largest forestry exporters is not expecting a major economic turnaround, despite the recession being declared officially over.

Peter Hill, managing director of Pentarch Forest Products which exports logs to China, told Checkpoint most of its export product this year came from its domestic market.

Mr Hill says the sawmilling industry is in dire straits and he does not expect more business growth or job opportunities to arise.