Poor Bill English - GDP revisions paint rosier picture of economy than we thought

News that growth was materially higher over the past three years than previously reported must be galling for former Prime Minister and Finance Minister Bill English. Photo / Mark Mitchell

Poor Bill English. It turns out the New Zealand economy was even better than he and Steven Joyce told us.

Statistics NZ today revised up its GDP numbers for 2015 and 2016.

Annual per-capita GDP growth was actually 2 per cent per annum over 2015 and 2016 (September years) - as opposed to flatlining.

It slowed to 0.8 per cent growth over the past 12 months.

Top line GDP growth is now reported to have peaked at 4 per cent in the 2016 calendar year.

Not that new numbers would necessarily have changed the mood of the electorate - from a practical point of view the economy was what it was.

And in the end it was the vagaries of MMP and failure to build a coalition which cost National the election.

But given that the lack of GDP per capita growth was a constant refrain from the Opposition during this year's campaign, the release of new figures must have been galling for the National leader and former Finance Minister.

Third quarter figures released today showed GDP expanded 0.6 per cent in the three months to September 30 versus (a revised) 1 per cent expansion in the June quarter and was 2.7 per cent higher on the year, Statistics New Zealand said.

Economists had expected GDP to expand 0.6 per cent in the quarter and 2.4 per cent on the year, according to the median in a Bloomberg poll.

But it was the historical revisions that stole the show, with growth materially higher over the past three years, ASB chief economist Nick Tuffley wrote.

"The weakness in previously published per-capita growth estimates was always surprising, particularly given the strength of economic supports including low interest rates, strong labour market and a robust export performance [particularly from tourism and fruit]."

National finance spokesman Steven Joyce said the new numbers provided confirmation that the new Coalition Government has inherited a strong economic growth story.

The figures "finally put to bed the fallacy that New Zealand was having a 'productivity recession'," he said.

National Government critics argued that low GDP per capita growth was evidence that new wealth creation was coming entirely from immigration rather than productivity gains.

The new numbers have left economists to ponder the implications for monetary policy and the inflation outlook.

Westpac's Michael Gordon noted that "suggest that the New Zealand economy may be closer to full capacity than thought".

Paul Dales, at Capital Economics in Sydney, wrote: "The good news is that the
economy grew much faster in 2015 and 2016 than we all previously thought. The bad
news is this makes the recent slowdown look a bit sharper and casts further doubt on the ability of the economy to generate inflation."

That could potentially see interest rates on hold for longer.