English optimistic about growth after GDP uptick

Finance Minister Bill English says he is optimistic that economic growth will pick up later this year, as statistics issued today show the country only just avoided a double-dip recession.

Gross domestic product rose 0.2 percent in the December quarter following a decline of 0.2 percent in the three months to September, according to Statistics New Zealand figures.

A 2.5 percent rebound in manufacturing during the December quarter was mostly offset by falls in other parts of the economy.

Mr English said the figures confirmed the economy was subdued in the second half of last year but there were reasons to be optimistic about the outlook in the coming year.

Annual growth last year was 1.5 percent -- the highest for more than two years -- and the economy had expanded in six of the past seven quarters.

"The economy is making the adjustment it needs to -- away from excessive borrowing and housing speculation and towards more savings and debt repayment," Mr English said.

"In the short term, this is constraining growth, particularly in domestic sectors like housing and retailing.

"But looking ahead, there are reasons to be optimistic about growth picking up later this year -- despite the devastation and considerable disruption of the second earthquake in Christchurch last month."

Council of Trade Unions economist Bill Rosenberg was less optimistic about today's figures, saying whether or not there was a small increase in GDP was beside the point.

"The economy continues to stagnate, and the September Christchurch earthquake was only a part of the picture affecting the December quarter," he said.

"The continued poor performance of the economy despite record high commodity export prices suggests that the government stimulus measures, mainly through tax cuts, were not well directed."

Mr Rosenberg said there was some good news in the results, noting the rise in manufacturing, but added that business investment was yet to translate into jobs and the agriculture sector was still in recession.

He challenged claims the subdued results were due to people paying off debt.

"Any repaying is most likely being done by high income households -- using tax cuts which have increased the government's debt. Low income households are just finding life very hard."

Mr English said yesterday that the Government would face the biggest budget deficit in New Zealand's history at the end of the current financial year, with an increase in debt needed to rebuild Christchurch.

He said today that the Government needed to play its part in re-balancing the books by getting its finances in order and returning to budget surplus.