Council of Trade Unions media release
23 December 2010
GDP falls - Government needs to rethink
GDP figures published today are at the low end of expectations and show the economy is at risk of re-entering recession, said the CTU. The economy’s production measured by GDP fell by 0.2 percent in September. Measured by expenditure, GDP fell 0.4 percent.
“At the very least, this reinforces our fears for continued high unemployment,” said Bill Rosenberg, CTU Economist. “The government needs to rethink its strategy of holding government spending and focusing on debt rather than continuing stimulation and assistance to the economy.”
“Not only is the economy faltering, but the government’s aim of growth in the tradable sector of the economy (exports and import substitutes) is also failing. Agriculture and goods-producing industries including manufacturing are both in recession if measured by two consecutive quarters of contraction. Forestry was the only primary industry to grow in this quarter and even there, exports fell.
“Essentially, the economy has been kept going by the services sector. A strong services sector is not a bad thing in itself, but it shows that any export-led recovery has weakened with the high dollar and recent strong agricultural and forestry exports peaking. Business investment has stopped growing. Much more direct involvement in the economy is needed to assist industry to revive and provide jobs.”
Output per person has fallen even more than GDP. While production fell by 0.2 percent in the quarter, production per capita fell by 0.4 percent.
The Canterbury earthquake in September will have affected the results this quarter, though Statistics New Zealand was unable to estimate how much. The rebuilding will boost GDP next year. “But the government cannot continue the strategy of government expenditure cuts, changing the rules and hoping recovery will look after itself,” said Rosenberg.