Almost the double dip

December 24th, 2010 at 7:51 am by David Farrar

The Herald reports:

New Zealand’s economy contracted in the third quarter and growth in the second quarter was revised down to a wafer-thin 0.1 per cent, showing the nation came close to a double-dip recession this year.

Gross domestic product shrank 0.2 per cent in the three months ended September 30, according to Statistics New Zealand, compared to the 0.2 per cent growth predicted in a Reuters survey of economists and the 0.3 per cent forecast from the Reserve Bank. Growth in the second quarter was revised down from 0.2 per cent.

I guess we can all agree now the Reserve Bank hiking interest rates was rather premature!

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36 Responses to “Almost the double dip”

  1. Manolo (13,755 comments) says:

    English fiddles while the New Zealand economy burns.
    He and his boss Key are guilty by their complete inaction and passivity.

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  2. tvb (4,418 comments) says:

    Came close to a double dip recession!!! We still have one quarter to go and if that is negative then we WILL have a double dip. I think there is something fundamentally wrong with the New Zealand economy, we should be doing as well as Australia. We are just as mineralised, for instance, despite Gerry Brownlee’s cack handed attempt to kick this along.

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  3. big bruv (13,886 comments) says:

    Dead right Manolo…….

    Meanwhile, we have “rewarded” English and the rest of the parasites in Parliament with a pay rise.

    The productive sector reward themselves with productivity bonuses, our MP’s award themselves pay rises irrespective of how badly they are handling things.

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  4. mattyroo (1,027 comments) says:

    Something is fundamentally wrong tvb;

    – we have too many maori’s with their hand out for treaty grievance claims;
    – we have too many latte liberals who are against mining, but want to keep their working for families payments and interest free student loans for their kids;
    – we have too many drug fucked dole bludgers who want to drink all day long and just live off the productive sector, because we have a sector of the community who says this is ok;
    – we have a generation of kids getting pregnant and then breeding for business, to receive more DPB payments; and
    – we have a gutless government that will not effect any real change that might cost them a vote or two, oh but we have Keys cycle track! Useless cunts inspire me with confidence. Not.

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  5. Bed Rater (239 comments) says:

    On the other hand. Ipredict’s “Negative Growth Quarter in 2010″ was sitting very low before yesterdays announcement. This wasn’t really predicted. Glad I went long on that.

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  6. Viking2 (11,467 comments) says:

    I think there is something fundamentally wrong with the New Zealand economy, we should be doing as well as Australia.

    Absolutely right. but yesterdays discussion on the Rail Tender shows the reason why.
    Aussie looks after its interests unlike NZ where we lie back and tell the world to fuck us gently.
    Its that strange philosophy promoted by people who take and never give. I will be rich but you won’t stuff.
    Until NZ stops trying to change the world and we sack all those that spend their time and our money attempting to do that and spend that effort maintaining NZ’s interests then nothing will change. We will be back here next year with the election over bemoaning the same shit because most Kiwi’s are happy with their lot rather than having an improved lot.

    Remember that until the Govt. is coupled with people like Brash and Act and not dependent on the largess of the Maori Party it will continue its mediocre performance because like all socialists they have to interfere and control our lives. That actually not Govt.’s job.

    Govt.’s job is to create the proper conditions for Nzer’s to be wealthy, healthy, happy and free.
    We haven’t been there for a longtime.

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  7. Graeme Edgeler (3,289 comments) says:

    After that title, I was sure this was going to be an article about an MP!

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  8. Manolo (13,755 comments) says:

    Remember that until the Govt. is coupled with people like Brash and Act and not dependent on the largess of the Maori Party

    Unfortunately, is not going to happen. Key, his Labour-lite minions and spin-doctors prefer the company of racists in the knowledge there will be many ignorants who vote along race lines. Disgraceful.

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  9. redqueen (562 comments) says:

    It’ll be interesting to see what reaction we get for this. We’ve had years of binge-like economics (buy now, worry about the debt later). We’ve transformed our economy away from exports, are dependent on capital imports, and then suddenly expect to just change back. It’s also amusing that everyone starts making huge pronouncements when the reality is that we still have a current account deficit and Kiwis haven’t curtailed spending or started saving to offset this. When we actually get back to being a net-saver, and to the point that we’re actually repaying the principle we’ve borrowed, we’ll begin to see improvements. Until then, we’re in a hang-over and everyone is whining about how it hurts and it’s the ‘Government’s fault’ that we aren’t feeling better. You reap what you sew.

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  10. Nick R (507 comments) says:

    I’d like to hear even one practical, sensible and rational policy announcement from the Government that will help drag the country out of this stagflation. At the start of the year they were predicting a robust recovery. Now the best they can must is a sort of limp hope that we won’t have another recession. Which is a bit late really. Average growth over the last 6 months is already negative, and I’d be surprised if the December quarter is any better.

    But all we get is cycle paths and the mirage of a financial service hub, which must have Singapore, Hong Kong and Sydney shaking in their boots. Not enough cojones to go mining, so they are all out of ideas.

    Still, no worries. As long as the polls keep on smiling, it’s all sweet, right? It seems the public doesn’t expect any better, and is happy with the status quo. All a bit depressing really.

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  11. grumpyoldhori (2,362 comments) says:

    Fuck me, we still have dumb tossers who want family values Brash back in government.
    It is not going to happen, you would be far better off joining Red in taking part in an armed right wing revolution.
    Now that would be a wonderful popcorn moment.

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  12. Pongo (372 comments) says:

    I think its more Bollard that needs to answer some hard questions, his forecasts were so far out its a joke. When he first hiked my order book was looking pretty good but indicating he was going to be raising rates clients were thinking hell we are going to be paying double digit rates again. I have never seen business stop that quick before.
    The guy is clueless and needs to step down, legislation is fine implementation is shocking.

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  13. decanker (184 comments) says:

    The Government should be seriously backing early stage companies and other companies with proven or potential high export growth. Not token grants but real capital investment and go-to-market support so we can see the kind of expansive growth properly funded companies experience elsewhere in the world. Companies should be able to use the NZ govt connections abroad as leverage. Not a trade mission here and there, but focused relationship building. The likes of NZTE are not held up to enough scrutiny. NZ needs to get serious about investing capital in its companies and backing ourselves. Our country and companies are too small to do otherwise.

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  14. Jimbob (641 comments) says:

    The Western World has piled on the debt since WW2, and now sovereign debt is at a record extreme. Some countries can not borrow any more and it is spreading thoughout the World. I believe this is a major problem and Ben Bernanke can not flood the system anymore with fresh money as no one wants it. People will have to borrow fresh money to get a economy moving, at the moment no one wants to borrow and the banks do not want to lend.
    Australia is lucky as it is feeding China, so when China cools off, so will Australia.
    So my prediction is that next year it will get worse, as money will be hard to come by as the credit markets freeze up from the expected sovereign defaults that are just around the corner. If we get a quarter next year positive GDP I will be very surprised.
    The productive sector in this country get no incentives, but the public sector gets everything. DPB, working for families, interest free student loans, rent allowances, etc etc.
    How about allowances for research and development, cheap loans for start up companies in technology or biotechnology areas. When will someone in Government start thinking ahead to solve this huge problem as the productive sector is slowly dying from the weight of people it has to support.

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  15. Gooner (995 comments) says:

    I guess we can all agree now the Reserve Bank hiking interest rates was rather premature!

    Is this the best that can be said on this?

    If Labour was in government, we’d have paragraph after paragraph on why it was Labour’s fault.

    The Reserve Bank tinkering with interest rates is a red herring. Japan has had 0-2% interest rates for over a decade and is still in the doldrums economically. The USA has real interest rates of 0% and is still in a deep malaise, and will be for years.

    Referring it to Bollard is like blaming the ref for a rugby test loss when what you actually have to do is look in your own backyard. And NZ’s backyard is overgrown and in need of some massive landscape gardening.

    I look forward to the Prime Minister’s “from the throne” speech in January. If it’s anything like last year’s (see below) we can expect Obama-like slogans, but little real action. And I say that with deep disappointment, and almost hurt in my gut.

    One other thing to remember, is that 2011 is election year. I doubt National will take risks, let alone big ones, in election year.

    See: http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10625089

    “I believe New Zealanders will see we are serious about a growth agenda, about lifting wages and opportunities for New Zealanders.

    “I think they will see that we’ve carefully considered the position that there is balance, but we are taking some bold steps, I believe, to transform the New Zealand economy,” he told reporters today.

    The economy and tax reform will be the centrepiece of the speech.

    The Tax Working Group last month released its recommendations to revamp the tax system which it says is broken and needs comprehensive reform.

    There has been intense debate about all the recommendations and Mr Key said not everyone would be happy with the Government’s decisions.

    “We are being asked to make some significant changes, but to do so without the fiscal head-room just to give away lots of extra money. That adds a different and more difficult dimension.”

    Mr Key said the line the Government was taking could cut in on his political capital, but that was to be expected.

    “That may be the case, but in the end you’re in politics to make a difference for New Zealand…I want to make sure that in my time in office I make a difference to making New Zealand a wealthier country, where our kids want to stay here.

    “In the end political capital is a bit of an abstract concept, and whether people support our vision for New Zealand will be determined at the next ballot box. But in the end I’ve got to do what I think is right – and this is what I think is right.”

    Mr Key said preliminary discussions had been held with support parties about the reforms and while their votes had not been “signed in blood”, he did not anticipate problems, including final decisions in the May budget and implementing them shortly after.

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  16. Gooner (995 comments) says:

    Following on, I think that comment by DPF can be amended:

    I guess we can all agree now increasing electricity, petrol and other prices through the ETS was rather premature!

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  17. redqueen (562 comments) says:

    Well said, Gooner.

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  18. nickb (3,687 comments) says:

    Agreed ^^^^

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  19. Manolo (13,755 comments) says:

    I look forward to the Prime Minister’s “from the throne” speech in January. If it’s anything like last year’s (see below) we can expect Obama-like slogans, but little real action.

    You can bet a few quid Key will give us an optimistic update on progress of that wonderful job generator: the cycleway.

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  20. Pete George (23,559 comments) says:

    Gooner at 10:13 am:
    I look forward to the Prime Minister’s “from the throne” speech in January. If it’s anything like last year’s (see below) we can expect Obama-like slogans, but little real action. And I say that with deep disappointment, and almost hurt in my gut.

    One other thing to remember, is that 2011 is election year. I doubt National will take risks, let alone big ones, in election year.

    I’m looking forward to it to, but I’m not raising my expectations. I don’t have a problem with National taking a steady cautious approach over the last two years – but it’s now time for Key to signal some more action. He has an unusually good opportunity – the Nats have had time to settle in to the job, and aren’t under any real threat from Labour – so Key and his government have a chance to really make a mark.

    I hope his break away from the job and country gives Key the opportunity to reflect, and plan boldly. There has to be more in him than a six year fizzer.

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  21. Danyl Mclauchlan (1,069 comments) says:

    It’s not going to just be a double dip recession.

    English cut taxes without cutting spending because him and Key thought that the magic of cutting taxes for high income earners would lead to a ‘robust recovery’. It hasn’t. Instead we are still in recession only now we have a massive deficit. So English’s only option to avoid a credit-downgrade is to reduce spending. That means several hundred million dollars a week sucked out of the economy, which will lead to another round of business failures and higher unemployment. We’re looking at a triple dip recession, at the least.

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  22. Pete George (23,559 comments) says:

    Danyl, the tax cuts took effect on October 1, the third quarter ended in September – effects can’t work backwards.

    The fourth quarter will barely have time to show the effects (or not) of the tax adjustments.

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  23. decanker (184 comments) says:

    Jimbob, I agree, though I’d go further than R&D grants. Governments need to get serious about commercialising all this research and technology being developed. There will be no real wealth creation if the Government isn’t backing up the R&D grants with real capital investment for go-to-market export strategies. Otherwise companies with great expertise and technology will continue to be under-capitalised, groveling down the bottom of the world fruitlessly hoping for their big international win.

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  24. side show bob (3,660 comments) says:

    So we were down 0.1% to 0.3% shit we can only get a 1.4% rise for that effort, what a bastard, if it had been down a whole 1% we might have been able to pull a 5% pay increase out of the bag.

    Three cheers for Jimbob and Gooner, a bit of sense.

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  25. Gooner (995 comments) says:

    Pete George said:

    I don’t have a problem with National taking a steady cautious approach over the last two years – but it’s now time for Key to signal some more action. He has an unusually good opportunity – the Nats have had time to settle in to the job, and aren’t under any real threat from Labour – so Key and his government have a chance to really make a mark.

    The problem with this statement Pete, is that Key has signalled action for a long time, but hasn’t followed through with it. He has had the opportunity via a massive poll lead for two years, but hasn’t used this capital.

    As I said, 2011 is election year. It is very, very unlikely we will see action in 2011.

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  26. tom hunter (4,826 comments) says:

    So English’s only option to avoid a credit-downgrade is to reduce spending. That means several hundred million dollars a week sucked out of the economy, which will lead to another round of business failures and higher unemployment.

    The “private sector” economy is now dependent on government spending to this degree? That’s probably true: all the “private sector” companies I’ve worked for in the last few years seemed to get most of their money from the government, either central or local.

    In that case English does have another option: he can raise taxes. In fact he should also claw back the Cullen tax cuts, since they’re the ones that probably are to blame here from a timing perspective. Sure, that will also mean several hundred million dollars a week (?) sucked out of some parts of the private sector, but that mainly from the idle rich.

    But what the hell, clearly much of the private sector does not depend on that anyway and if the government turns around and spends it on them we’ll avoid business failures and increased unemployment without making the deficit any worse. Win-Draw.

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  27. berend (1,708 comments) says:

    DPF: guess we can all agree now the Reserve Bank hiking interest rates was rather premature!

    No, the reserve bank is setting is up for another bubble, just like the housing bubble. Well, actually our reserve bank is pretty irrelevant for interest rates, so perhaps not that much.

    But central planning of the interest rates, and that is what the Reserve Bank does, fails as with all central planning schemes.

    You can’t centrally plan the economy else Cuba and North Korea would be the best places in the world.

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  28. berend (1,708 comments) says:

    Money printer Danyl writes: That means several hundred million dollars a week sucked out of the economy

    Nonsense, same amount of money in the system. If Bill has less money, it means more money in the owns of private businesses, so the total money in the system has not changed.

    Ah forgot, the rich are going to put that away and now we don’t have the magic government multiplier!!!

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  29. wreck1080 (3,906 comments) says:

    I always maintained the reserve bank hiked too early.

    In fact, the reserve bank constantly seem to get it wrong. Back in the boomtimes they should have raised rates much faster and I was saying that at the time. If they had have raised rates faster and higher, then , perhaps we wouldn’t be so much in the poo we find ourselves today.

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  30. Simon (721 comments) says:

    English is sucking $300 million out of the private sector economy each week. Government is inefficient, wasteful and misallocates resources.

    With low interest rates there is no capital formation. Without capital business cant start up, expand or employ people. Low interest rates kill employment, fuels speculation and create an unsustainable economy.

    There is nothing Wellington can do. When China crashes it will take out Australia and NZ gets cleaned out as well. The NZ taxpayer will be bailing out at least 2 major trading banks. It is just a matter of when.

    NZ$ will crash. Buy hard assets or find a stable currency.

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  31. kaya (1,360 comments) says:

    berend – “You can’t centrally plan the economy else Cuba and North Korea would be the best places in the world.”

    In that respect we are no different from Cuba and North Korea. It is laughable how econmystics in the West delude themselves that we have an open, free market system compared to those countries. What a fucking joke.
    When the USA pours billions into their financial sector to keep it afloat (why? It does fuck all!) and our Reserve Bank tries to manipulate the economy by changing interest rates? There is no difference.

    The biggest problem we face is financial institutions sucking the life blood out of society. Banks taking nutty profits for supplying the means of exchange!!! Financial players trading “commodities” between each other for insane profits, then screaming to the Government that they need taxpayer help to stop them from collapsing when it goes wrong………..Helloooooooo!!!!!

    Fuck if we ever needed a meltdown to show the world the true value of products and services it is right now. Can you imagine an investment banker arguing his case for a bonus in a post apocalypse world? Comedy gold. Not that I want to ever see it but the image puts a lot of this crap into context. The world has gone fucking nuts.

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  32. Danyl Mclauchlan (1,069 comments) says:

    Money printer Danyl writes: That means several hundred million dollars a week sucked out of the economy

    Nonsense, same amount of money in the system. If Bill has less money, it means more money in the owns of private businesses, so the total money in the system has not changed.

    English doesn’t borrow money from New Zealand investors – he borrows it from the international money markets, principally through bond sales. If he cuts spending so he can borrow less then that is money that is no longer entering the New Zealand economy.

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  33. emmess (1,428 comments) says:

    Haven’t we already had a triple dip recession?
    We had six consequecutive quarters of negative growth.
    Somehow, that should only count as a single dip because they were a one after another?

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  34. Hurf Durf (2,860 comments) says:

    Has this government made any actual spending cuts other than kicking out a few hundred surplus to requirement bureaucrats and tightening up ACC? It appears that economic policy so far has been keep plodding along and hope nothing goes bad.

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  35. Michael (909 comments) says:

    We will almost certainly have a significant growth in the last quarter on 2010. There has been a lot of in-flow capital as a result of the Christchurch Earthquake and rebuilding work is begun in earnest.

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  36. bchapman (649 comments) says:

    Its the decline of manufacturing that is causing the biggest collapse- high dollar is seeing to that. Key says there is nothing that can be done about this- how about getting interest rates down?? So nothing is going to change.

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