Analysts predict five more quarters of recession

New Zealand is staring down the barrel of another five quarters of recession on the back of low private spending and weak export figures.

Given that New Zealand was already in recession before international markets started collapsing, and the woes the country’s trading partners are experiencing are going to make the 2009 year worse than 2008, JP Morgan analysts are picking GDP growth of just 0.2% for the 2009 year – down from 0.4% in 2008.

Recovery is not expected until the 2010 financial year, where GDP growth is projected to be around 2.4%.

Growth in private consumption is projected to remain subdued, at around 0.1% led by pains in the housing sector – which declined for the eighth straight month in November.

JP Morgan projects the sector will fall another 10% across 2009, rubbing out any consumer advantages presented by lower commodity prices, petrol, interest and tax rates.

Continued speculation of another $1 being written off Fonterra’s milk price, equating to around $5kg/ms could wipe another billion dollars off the economy and hurt exporters.

Fonterra has been having a nightmare year culminating with a stockpiling of unsold milk, and problems in China. New Zealand’s largest exporter’s troubles mean overall exports are projected to fall by 3% in 2009.

The jobless rate currently sits at 4.2% - a five year high – and unemployment is expected to climb to 6.7% by the end of 2009.

The National government has made the economy a priority and analysts appear to be mostly happy with OCR cuts (down from 8.25% to 5% in December), which are expected to soften the blow, and a fiscal stimulus package of $7 billion over 2 years (4% of GDP).