Finance Minister Bill English has welcomed new data showing the economy grew in the last quarter but repeated his caution about the country's recovery.
Figures released by Statistics New Zealand today show the economy grew less than 0.1 per cent in the June quarter, according to Gross Domestic Production (GDP) figures released today, following five quarters of contraction.
SNZ warned the growth was so small it could not be seen as a sign of economic recovery.
English said the growth was based on better than expected performance in the primary industry exports, particularly forestry and logging.
It showed the economy was "through the bottom of the trough and is stabilising", he said.
But, unemployment was expected to continue rising and there was still "a lot of work to do".
"Much of New Zealand's growth in recent years was based on a diet of consumer debt and Government spending.
"This has left us serious structural imbalances and an underpowered export sector," he said.
Investment in business and job creation was needed, he said.
"A return to the unbalanced growth of recent years could ultimately lead us back to where we are now."
NZ strategist at Goldman Sachs JBWere, Bernard Doyle, said the result "in rule of thumb parlance," ends New Zealand's recession which ran from the fourth quarter of 2007 to the first quarter of this year.
ASB economist Jane Turner said the 0.1 per cent GDP rise "technically speaking" had broken the recession of the past 5 quarters.
The breakdown of the figures " suggests slightly more underlying strength in the economy than we had expected."
"Back in black in the growth stakes - for now at least. The economy has ended a 2.9 per cent contraction. The underlying detail looked more robust than the headline itself implies, which is also encouraging," said Turner.
"However, timing could be partly behind the return to positive growth. Underlying indicators such as business confidence suggested the quarter should be a bit weaker than our positive GDP component forecast did, but indicated more of a lift for Q3."
"But before anybody starts popping champagne corks and declaring the recession is officially over, it is worth remembering that the growth we expect in the second half of the year is still very weak and - like in Q2 - just a margin of error between slight expansion or contraction."
Turner said it was "better to think of the economy has having begun stabilising rather than rebounding."
Combined Trades Union secretary Peter Conway said that some were saying the recession was over, despite projections that unemployment will peak above 7 per cent in 2009 or 2011.
"There are mixed messages for workers at the moment. On the one hand they are hearing that the worst is over: on the other hand the labour market environment is harsh".
"Although many employers have adopted a reasonable stance both in respect of maintaining jobs and negotiating on pay increases, there is a much more aggressive stance by some employers with increased lockouts and a refusal to consider even minimal pay adjustments."
"The figures out today show there is a long way to go. However there is sufficient optimism in these figures that even the most hard-nosed employers need to reconsider their approach to worker issues at this time."
The Government also needed to increase the scale of economic stimulus to head off the increasing level of unemployment.
The economy has resumed growth sooner than Reserve Bank Governor Alan Bollard had projected, after he said a patchy recovery probably began in the current quarter.
He's kept the official cash rate at a record low 2.5 per cent, helping buffer New Zealand from the global downturn, while a pick-up in net migration and increased government spending limited the extent of the slump.
"Sentiment globally has continued to improve, share markets have done well and confidence has continued to improve - things are not as dire as maybe we thought six months ago," said Andrew Michl, who helps manage $3 billion in fixed interest and cash at ING New Zealand Ltd.
Michl said while people are starting to speculate that the Reserve Bank may bring forward its interest rate increases, as evidenced by the pick-up in swap rates, ING believes Bollard is "probably quite realistic" in predicting rates won't pick up until the second half of 2010.
The growth figures come after data yesterday showed the current account deficit shrank to just 5.9 per cent of GDP in the second quarter, while Fonterra Cooperative Group raised its forecast payment to dairy farmers, citing a pick-up in global demand for dairy products.
The New Zealand dollar jumped to 72.82 US cents after the GDP report, from 71.89 cents immediately before the figures were released.
The kiwi has soared 48 per cent since sinking below 50 cents in March. In the same period, the benchmark NZX 50 Index has climbed 30 per cent.
This morning's GDP figures showed the primary industries were up 1.5 per cent in the June 2009 quarter, mainly driven by forestry and logging (up 8 per cent).
The increase in forestry and logging production was related to an increase in exports of logs to China.
The goods-producing industries contracted 0.5 per cent manufacturing (down 1.3 per cent) and construction (down 1.9 per cent) industries both declined.
Activity in the services industries was flat this quarter.
Service industries that increased were real estate and business services (up 1.5 per cent) and communications (up 1.7 per cent).
- NZPA / NZ HERALD STAFF / BUSINESSWIRE
