“Confirmation that the economy grew strongly in the third quarter of the year is welcome news before Christmas”, Finance Minister Nicola Willis stated in the first line of her press release yesterday.
‘Welcome news’ may be a bit of an understatement, given the context of recent attempts to undermine Nicola Willis and the government’s approach to righting the economy.
Willis also needed the good GDP news after a disappointing Half Year Economic and Fiscal Update on Tuesday, in which almost every economic and fiscal indicator moved ever so slightly in the wrong direction.
The GDP results showed the economy did better than expected in the September quarter, growing 1.1 percent. GDP per capita rose 0.9% for the quarter if that's how you prefer to measure it. The increase in economic activity was broad based, with increases in 14 of the 16 industries that Stats NZ looks at. This is good news.
But the problem with GDP figures is they’re provisional and often revised. That’s what has happened with the previous June quarter – which did worse than previously thought, falling one percent. If you look at it from an annual point of view, from September to September, the economy contracted 0.5 percent.
These numbers provide an overview of what’s going on. They are a sign of a gentle uptick rather than a booming recovery. But they don’t give politicians a true sense of what is going on in New Zealanders day to day lives. As Liam Dann wrote recently, GDP doesn’t capture wealth distribution, it doesn’t tell us about the health of our nation, or the overall happiness of its people.
As the end of the year approaches, Luxon and Willis survive ‘25 to enjoy a summer BBQ and a bevy or two and get to return to their leadership roles in 2026. But hopefully they and their politician colleagues will spend some time over the summer listening to ordinary Kiwis to get a sense of how New Zealanders are feeling about the cost of living, job security, and the challenges facing those running a business.
Yesterday’s GDP figures give Willis breathing room. But the pressure is on next year. Willis is excellent at sticking to her core messaging of fiscal discipline without causing misery to voters. It’s a plan that holds some risk – there’s little room to deal with the consequences of potential natural disasters or global financial crisis in the near future.
The ‘steady as you go’ message will remain next year, and yet there’s a sense the hard yards haven’t started yet. If we’re going to meet the 2029 – 2030 surplus target, the ruler is likely going to have to come out again. Social services and public servants will most likely be the targets.
In the meantime, we can head into the New Year with some cautious optimism that the economy may have peaked a look around the corner. I like the expression one of my listeners suggested to me on Sunday - ‘brick by brick in 26’.
Maybe then we might have built something a more stable by 2027.
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Dec 18 202535 mins