CTU Media Release

22 March 2012

Growth in economy weak

The GDP growth of only 0.3 percent in the three months to December is below expectations, says CTU economist Bill Rosenberg. “The economy is still going nowhere. The government seems content to have unemployment at over 6 percent and wait for the reconstruction of Christchurch. Its cuts in spending are contributing to the stagnation. It’s past time for a much more active approach.”

“While there is still good news in the agricultural export sector, falling prices may put that at risk, and in the meantime the domestic economy actually contracted.”

Activity in manufacturing fell in the December quarter, with a substantial fall of 5.6 percent even in the usually strong food and beverage subsector. Textiles and apparel, down 10.1 percent, may be suffering from a squeeze between high raw material prices and import competition.

“Although the accommodation and restaurant sector was helped by the Rugby World cup, the main domestic growth source is finance services, which is at its highest level since the series began in 1987, and business services.”

“It is not clear that the so-called rebalancing of the economy towards exporting is anything more than increased agricultural production resulting from high international commodity prices which appear to have peaked,” says Rosenberg.

“While there are a number of positive signs in reduction of inventories indicating stronger sales and some increase in construction, fishing and the forestry industry declined. There needs to be a much more active focus on higher value added exports, and ensure that higher wages go with them, creating demand in the domestic economy.”

ENDS

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