Nicola Willis: Economic Growth Minister on the GDP rising 0.8% in the March quarter
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What does the 0.8% Q1 GDP rise tell us about New Zealand’s economic momentum?
to the economy where we have had a week of interesting if not slightly contradictory fiscal data as far as i can work out culminating yesterday in the q1 gdp read of 0.8 pretty solid nicola willis finance minister back with us morning good morning does it the factor was 0.8 not the one that some called worry you
No, because when Treasury put the budget to bed, they were forecasting that growth in Q1 had been 0.4. So this is more than twice what they were forecasting and suggests the economy was off to a very solid start at the beginning of the year. And, of course, it's the third quarter in a row of solid growth, so it shows that momentum had really been building. So I see it as a very positive thing.
With revisions, the annualised numbers are the key to the story, isn't it, really? I mean, we were doing fine.
Yeah, that's right, because there were revisions up for previous quarters and overall that showed that the momentum in the economy had been growing, which is consistent with what we've been saying, which is, look, the foundations in the economy have improved, are better. There's every prospect of growth, of course, events in the Middle East. We're a big setback and we expect that the Q2 numbers will not be as sunny. But now the oil price intentionally is tracking lower than Treasury had been forecasting at budget time. So there's every reason to believe that flows through into lower prices at the pump, lower inflation, better prospects for our economy.
Let me come back to the oil in a moment. Manufacturing led Q1. Manufacturing has gone into recession or contraction since then. Do you think Q2 is underwater?
Well, look, I don't want to pick.
Why did Treasury underestimate Q1 growth and what were the revisions?
I think you two will be a difficult quarter. But look, the manufacturing numbers in the first three months of the year were really strong. And, you know, that was quite different from the headlines we were getting at that time because it's manufacturing and food manufacturing as well. where we did have some very high profile closures. But despite that, the underlying growth rate was strong. So yes, recent survey data shows that manufacturers have struggled with those high input prices and Q2 may be a bit different. But again, something underlying there is pretty positive.
The contradictory thing I was referring to in my intro, construction, job numbers in construction this week in some parts of the country are through the roof. Like they're hiring like there's no tomorrow and yet construction was a dog. So do we see something good in construction or we just don't know?
Well, those construction numbers for Q1 are much lower than I'd like to see. There is this other construction category, and that's what captures things like infrastructure construction, energy construction, your solar farms, your wind farms, and that number is more positive, which suggests that infrastructure investment by government and local government and others is supporting some good activity, but that residential construction number has been struggling. But again, consents are now up. So we'd hope to see that translate through into more residential construction activity.
Right, that oil, $3.07 on average this morning, I buy next week it's got to be below $3, which starts to trigger your four-week thing. In a month and a half or so, we're out of this, aren't we? In terms of your subsidy?
Well, wouldn't that be an amazing thing for New Zealanders if the price of petrol at the pump had got lower than $3 for four weeks in a row? That would be a better picture than any of us had dared forecast.
Well, it's about to, isn't it? Well, no, give me credit. I told you this was going to happen, didn't I?
This is an instance where Mike Hosking's optimism is absolutely well placed and I'm delighted by that because I think we need a lot more optimism around this country of ours and it is very positive to see that oil price tracking lower, that petrol price tracking lower. It's more cash in Kiwi's pockets. It's better for businesses. They'll have more money to spare.
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