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Double dip recession possible – NZIER

A double dip recession cannot be ruled out, the New Zealand Institute of Economic Research (NZIER) says in its December quarterly predictions report.

"We expect wintry economic conditions this summer," NZIER said in the report which predicts the economy will be weak into early 2011.

"A double dip recession cannot be ruled out but it is not our central scenario. Instead, we expect weak activity over coming months, before a more sustained recovery from mid 2011," principal economist Shamubeel Eaqub said.

"The recovery will be shallow and volatile," he said.

Indicators such as levels of house sales and domestic trading activity measures point to a slow finish to the year, even without the destruction and disruption of the Canterbury earthquake in early September.

The institute forecasts economic growth of 1.7% in 2010, rising to 2.% in 2011 and 2.9% in 2012.

The Canterbury earthquake will weigh on growth in late 2010 but boost growth next year as reconstruction begins and the regional economy reverts to more normal spending patterns.

"Economic activity will be weak through late 2010 and early 201, but we expect a more sustainable and broad based recovery from mid 2011.

"For businesses with tight capacity this is the time to invest; to capitalise on a more sustainable recovery from mid 2011," Mr Eaqub said.

More by NZPA and NBR staff

Comments and questions
13

Recessions build character.

Bring it.

But what about those who are laid off because of factors beyond their control? They can't all emigrate, especially if they have teenage children who have developed frienships and can't be safely uprooted.
The Government does not have and has almost never had a financial crisis. It has an expenditure priority crisis. There is no shortage of money for social welfare.
Maybe we need a mild form of mother of all budgets.

Double dip recession is inevitable. The world economy cannot be improved just by to the flooding of more US$ printed by the USA.

Support the Workers

Cut Welfare

Support NZ

We need a new Roger Douglas.

Quantitative Easing is short term Russian roulette. The government has to cut debt, stop borrowing and take the pain. If it means a double dip so be it. Kiwis are resiliant at the end of the day, and we have a structural issue in our eceonomy not a short term one that can be smoothed by a bit of extra spending. If we play our cards right we will emerge from this strong, if we play it wrong we will be paying for this for generations. WE DON'T WANT TO BE IRELAND!

It certainly is easier for someone whose household income has not taken an adverse hit due to this recession to have a proclivity to either wait it out and / or brace oneself more for safety - akin to watching other people in a hurricane whilst one is in a cosy, safe & sound spot. For those IN that hurricane, though, the priorities are somewhat different to character building as has been suggested by some dimwit above...

Currently, 96% of NZ economy is Small & Medium enterprise, of which about two thirds are sole trader businesses. At the other end of the spectrum, over the past two years a number of large enterprises have all too conveniently used the word “recession” as business justification to substantially streamline their organisations by reducing costs through headcounts as opposed to increasing revenue to meet EBIT targets. As a result, unemployment remains staggeringly high and small business sustainability outlooks incredibly poor.

Looking at what this pro-business government has done to substantially improve employment in the short term and introduce any policies to turn around this economy, I for one have struggled to find any that has actually made a difference. Other than a pathetic pandering to far-right policies, like the recent employment law change, in order to maintain a ruling coalition in power, it seems all “Government-as-Usual” to me, nothing more than that what would predictably have been achieved in “normal” circumstances. I have to seriously question this government's ability to actually do anything catalytic or transformational in the foreseeable future, other than hoping that external economic factors magically work in our favour.

It is often said that true leadership is born out of harsh adversity. Perhaps it is time for those politicians, recently rated like Pop Idols or Master Chefs, to demonstrate what they are actually got at, really...

Welfare is basic to looking after people and needs to kept, take it away and have caos,bloodbath. Cut high wages and feed people who are starving.

It's the people on high wages who pay the taxes to pay those on welfare. Companies and large business contribute litte to fhe tax pool, its the wage earner who can't claim any deductions and the low income earner who spends all of what they are left with that pays the majority of tax. Take high wages away and the pool of money for welfare will inevitably reduce.

Solomon, I suppose you were calling me a Dim Wit? I own and run a SME which has suffered severely through the GFC. So I feel eminently qualified to comment. All I was saying is short term polices won't work particularly extra spending by government. Having read your long winded blog I remain none the clearer as to what point you were actually making?

Its a time to buy GOLD (if this happens it'll be the only currency worth holding)... bye bye the real estate market....

Double Dip or Not – Does it Really Matter?

It's very easy to blame to government for everything that is wrong with our economy (recession or not). But the thing that can make you stand out from the crowd is being aware of the things that are going on in the world and look at different scenarios on what might happen to your business and how to take measures to avoid them.

If you look at today’s global situation, you can anticipate on what is going to happen. The EU bailed out Ireland but doesn’t have enough funds the bail out Portugal and Spain in the event of a collapse. So more money needs to be printed, just like in the US, and causes inflation and devaluation of currencies. Meaning a high NZD against the EUR and USD for example. This opens up opportunities for does import and distribution businesses in New Zealand to buy at lower prices abroad.

Within the G20 today the strongest economies (more than 2% surplus) are Saudi Arabia, Germany (maybe to a lesser extend because of a weakening EUR), Russia, China, Japan and South Korea. This could mean export opportunities for those businesses wanting the venture abroad. However, having said that, regional political instability on the Korean peninsula may root some turbulence. Recent leaks may also spike increased oil prices as the Middle East will be looking at each other. This creates higher fuel (transport/travel) and plastic (household goods/appliances) prices for example.

Looking at all global conditions, the public is less likely to spend their discretionary budget on luxury goods causing challenges within retail for instance. Less revenue means some might need to close the doors and this will have an impact on commercial real-estate prices etc. The same reason why the number of houses sold on the market is extreme low today because people either don’t have the money to buy a bigger house when families get bigger or want to wait till interests rates drop. Hence the building and construction industry is under a lot of pressure.

So, no matter if we are faced with a double dip you need to look outside and see what is going on and look for opportunities. One man’s loss is another man’s win. You have to anticipate and be smarter than your competitors no matter if you are a big listed multinational or an SME.

A good crisis is needed to encourage NZ populus and Govt to look at where and how we spend our money.

General public: demand lower prices, seek best quality and value for your spending, save some for future needs, don't buy something on credit unless it will generate income. Don't encourage the black economy of small traders doing cashies.

Government: demand better value from the $s you spend, limit liabilities to a shorter time frame, no more dole or welfare for life (Dole is not a lifestyle), lay the groundwork for simpler investing and companie tax, if tax is low people stop trying to avoid it. Let businesses do the work, become a Governing Body, not an employment option. Provide a legal framework (+judiciary) where white collar thieves are dealt with, use the tax system to encourage Tertiary students (Kiwis especially) to stay and benefit society with their new found knowledge.

There is much more, but I need to do some work.