{"id":116338,"date":"2021-06-12T17:41:30","date_gmt":"2021-06-12T17:41:30","guid":{"rendered":"https:\/\/fin2me.com\/?p=116338"},"modified":"2021-06-12T17:41:30","modified_gmt":"2021-06-12T17:41:30","slug":"liam-dann-did-we-just-have-a-recession-here-comes-the-big-reveal","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/liam-dann-did-we-just-have-a-recession-here-comes-the-big-reveal\/","title":{"rendered":"Liam Dann: Did we just have a recession? Here comes the big reveal"},"content":{"rendered":"

OPINION:<\/strong><\/p>\n

Brace yourself for the big reveal.<\/p>\n

Has New Zealand been in a recession … or not?<\/p>\n

We find out on Thursday, when Stats NZ releases the official GDP figures for the first quarter.<\/p>\n

For<\/span> the record, a consensus of market economists now expects the GDP figure to be positive, meaning we will have avoided recession by its most common definition – two successive quarters of negative or zero growth.<\/span><\/p>\n

But they are hedging their bets. There is so much uncertainty in the world that neither a surprise on the upside nor a surprise on the downside would be surprising at all.<\/p>\n

In a rational world that should make the dreaded “R” word a bit redundant this year.<\/p>\n

And if we were in recession it certainly wasn’t like the grim downturns we had when I was young in the 1980s and early 1990s.<\/p>\n

At a personal level, it’s employment not output that tends to define our economic experience.<\/p>\n

New Zealand just hasn’t seen the kind of unemployment that creates a deep recessionary spiral.<\/p>\n

And regardless of how the numbers fall they are historic. The time has passed. It’s over. It was what it was.<\/p>\n

“We don’t want to get distracted by debate about whether the NZ economy skirted a technical recession … especially when the unemployment rate is so low and falling,” writes BNZ’s head of research Stephen Toplis in his preview of the big number.<\/p>\n

“Our point is principally that New Zealand’s economic indicators continue to acquit themselves very well.”<\/p>\n

That’s a sentiment echoed by all the local economists.<\/p>\n

I’ll echo it too, but with the caveat that I’m a journalist not an economist.<\/p>\n

Quantum physics tells us that there are particles which don’t exist in a specific state – until they are measured.<\/p>\n

Economies can be a bit like that.<\/p>\n

So let’s not pretend that the revelation on Thursday won’t present as doozy of a political football.<\/p>\n

The first quarter of this year was always supposed to be a tough one for the economy.<\/p>\n

In fact, apart from the lockdown-hit second quarter of last year, it was supposed to be “the” tough one of the pandemic.<\/p>\n

It includes the traditional peak season for international tourism and the time that international students arrive.<\/p>\n

Neither of which happened this year.<\/p>\n

Based on that the RBNZ still had a 0.6 per cent fall in GDP pencilled in for the quarter in its Monetary Policy Statement in May.<\/p>\n

But that’s an outlier now, with ANZ picking a rise of 0.5 per cent, Westpac 0.6 per cent andboth ASB and BNZ a rise of 0.8 per cent.<\/p>\n

It looks like those us that went shopping through the summer were the heroes, with household spending coming to the rescue to offset the loss of tourist activity.<\/p>\n

At ANZ, senior economist Miles Workman says he expects the data will be “pretty noisy under the hood”.<\/p>\n

Capacity constraints – like the difficulty finding labour, global shipping delays and supply bottlenecks – are probably alarger constraint on activity than the demand and income shock, he says.<\/p>\n

In other words, the economy is suffering from running too hot.<\/p>\n

Clearly, given we’ve just dodged a technical recession, it isn’t running that hot.<\/p>\n

But the structural constraints imposed by the pandemic, not just here but around the around the world, are the big problem – not a lack of money or the desire of consumers to spend it.<\/p>\n

<\/p>\n

The good news (for those who really like to worry about economy) is that even-stronger-than-expected numbers could be read as bad news.<\/p>\n

If topline growth is stronger than expected then it will provide further of impending inflationary doom.<\/p>\n

Numbers out in the US last week showed strong inflation setting in.<\/p>\n

This is the development that has many economists fearing interest rates will rise, crashing over-valued markets and putting the squeeze on a heavily indebted world.<\/p>\n

Then we really would have an unambiguous recession to talk about.<\/p>\n

There plenty of others, of course, who see inflation as a temporary pandemic-driven phenomenon.<\/p>\n

That all brings us back though to the real problem in the world right now being outside the real of economic theorists.<\/p>\n

The problem in the last quarter, this quarter and at least the next few quarters, is a nasty virus called Covid-19.<\/p>\n

Our response to it – locally and globally – remains the fundamental driver of economic success.<\/p>\n

ASB chief economist Nick Tuffley puts it in his latest economic outlook: “Countries’ economic fortunes this year and next will be heavily influenced by how swiftly populations get vaccinated against Covid-19 and start to allow freer movement both within their borders and across them.”<\/p>\n

How well New Zealand does on front wil be hugely significant and have a great deal of bearing on our GDP performance through the next year or two.<\/p>\n

Unfortunately there’s a lot that is outside our control.<\/p>\n

An efficient or less-efficient vaccine rollout might shift the time line for reopening a few months in either direction.<\/p>\n

But our success remains tied to the success of other countries in terms of both the flow of people and the world and the supply of goods – both of which are constraining our potential growth.<\/p>\n

It’s easy to forget that life is not yet normal. Not by a long shot.<\/p>\n

Central banks get it. Whatever the headlines read on Thursday, the Reserve Bank will have its sights set further out.<\/p>\n

We probably should too.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

OPINION: Brace yourself for the big reveal. Has New Zealand been in a recession … or not? We find out on Thursday, when Stats NZ […]<\/p>\n","protected":false},"author":3,"featured_media":116337,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"\nLiam Dann: Did we just have a recession? Here comes the big reveal - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/liam-dann-did-we-just-have-a-recession-here-comes-the-big-reveal\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Liam Dann: Did we just have a recession? 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