New Zealand’s economy has contracted for a third straight quarter as the combination of a weak housing market and a slowing global economy takes its toll.
The country’s gross domestic product contracted 0.4pc in the three months to the end of September and that follows a 0.2pc decline in the second quarter and a 0.3pc shrinkage in the first three months of the the year. The decline for the latest quarter was in line with economists’ expectations.
Like that of its larger neighbour Australia, New Zealand’s economy has enjoyed a booming housing market over the past decade. However, the bursting of the housing bubble has prompted New Zealanders to apply a sharp brake to their spending.
The drop in consumer spending in the third quarter was the third in a row and the worst run since the 1980s. The wider global slowdown is exacerbating New Zealand’s woes by hitting demand for its key exports such as milk, timber and lamb.
Analysts said the figures make further cuts in interest rates likely. The central bank slashed the rate 1.5 percentage points on Dec 4, following a full point cut in late October, although interest rates remain high compared with other industrialised nations.
“The big judgments will be about what’s happening in the [Group of Seven leading industrial nations] and emerging economies and whether what we’ve seen for the past three quarters locally is just the tip of the iceberg,” Deutsche Bank chief economist Darren Gibbs said.
Finance Minister Bill English said it was essential that New Zealand’s economy was put on a medium to long-term growth track as quickly as possible. “Our challenge for 2009 is to put New Zealand in the strongest possible position to take advantage of better economic times when they come internationally,” he said.
New Zealand was last in recession in the second half of 1997 and early 1998 amid the Asian financial crisis.
By Bonnie Malkin
Last Updated: 9:17AM GMT 23 Dec 2008
Source: The Telegraph