Some banks are predicting zero GDP growth during the March quarter
The Reserve Bank will continue to take action to quickly bring down inflation, even if fresh figures show the economy is already at a standstill, according to economists.
Read more: Reserve Bank of New Zealand lifts official cash rate
Stats NZ will soon release the GDP numbers for the three months to the end of March, amid gloomy expectations over what the report will show.
Just last month, the Reserve Bank forecasted a 0.7% growth in economic activity during the quarter; but ANZ, Westpac, and BNZ were all expecting zero growth, acknowledging that it was possible the economy may have gone into reverse, Stuff reported.
Kiwibank, meanwhile, was expecting 0.8% growth and ASB 0.6% growth from the previous quarter.
Murat Ungor, Otago University economist, said some of New Zealand’s largest trading parties had already reported negative or weak growth during the first quarter, while the US economy slipped 0.4% and the EU’s GDP grew a mere 0.6% amid rising recession fears.
Nearly all countries in the Organisation for Economic Cooperation and Development have already reported their figures, with the OECD now forecasting an average 0.3% growth across its 38 members.
Any surprise decline in NZ’s GDP could leave the Reserve Bank with more explaining to do over the suddenly more hawkish tone of its May monetary policy statement, when the central bank tipped the OCR to peak higher, at about 4% next year, Stuff said.
Ungor didn’t believe, however, that slow, zero, or even negative growth during the COVID-affected quarter could prompt the Reserve Bank to switch gears on monetary policy.
“Anything between zero and 1% growth should not be too much of a surprise,” Ungor told Stuff. “It will not tell us anything significant around the direction in which the economy is heading.”
He pointed to the “cost-of-living crisis” as one of the short-term economic challenges and the difficulty in raising productivity as one of the longer-term problems.
KiwiBank agreed the GDP figure would be “old news'' by the time it was reported.
“More important is the road ahead. And between weak confidence and a gloomier global backdrop, the outlook for the Kiwi economy has darkened,” it said. “Growth over the second half of 2022 is looking shakier by the day.”
ANZ’s Miles Workman said RBNZ was only likely to ease monetary tightening once inflation expectations and underlying inflation pressures, including the labour market, were “clearly beginning to soften.”
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“That’s simply not something the first-quarter GDP data is going to shine much light on,” Workman told Stuff.
According to Stats NZ, a further blow-out in the country’s ballooning current account deficit on Wednesday could harden the Reserve Bank’s resolve to reduce demand in the economy. The current account deficit in the March quarter sat at $8.5 billion, up from $6.6 billion in the December quarter, as imports rose sharply and exports failed to keep pace.
The deficit for the year to March was a “record” $23.3 billion in dollar terms, or 6.5% of GDP, although slightly lower as a percentage of GDP than when it reached 7.8% of GDP in 2008.
“We have, at least temporarily, been living beyond our means,” Westpac economist Nathan Penny told Stuff.
