National leader Judith Collins said New Zealand needs a National Government after official figures released show "we are in the deepest recession in living memory".

Figures from Statistics New Zealand this morning revealed that the economy shrank by 12.2 per cent.

Although the drop was not as sharp as the Treasury was expecting, it is still the biggest one-off quarterly dip in New Zealand's history.

"It's a significant drop in people's incomes," Collins said, of the GDP figures.

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She said this was a "devastating time" for many families in New Zealand.

Collins said many small businesses are feeling "a lot of heartache".

She again doubled down on the line that National would have "not let Covid-19 into New Zealand" as a way of saying what her party would have done differently to the Government.

She said tomorrow, when National unveils its economic policy, it would show a clear difference between her party and Labour's.

National's finance spokesman Paul Goldsmith said New Zealand is in a "deep hole".

National, he said, is focused on creating jobs in the future.

"What we have seen today confirms our worst fears." he said.

Goldsmith said everyone in New Zealand realises the challenges ahead.

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He blamed the fact that there was no construction in New Zealand during the lockdown for part of the decline.

Goldsmith said the Treasury has "got sloppy" under Finance Minister Grant Robertson, after the department was forced to make a number of corrections to the printed Prefu (Pre-Election Economic and Fiscal Update).

According to Statistics NZ, the drop was the largest quarterly fall recorded since the current series began in 1987.

It is the second quarter in a row where GDP has been negative – the technical definition of a recession.

However, the news was not unexpected – economists, the Treasury and Robertson have been saying for some time they expected a recession.

Robertson said this morning the figures were "better than forecast".

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"The June quarter includes almost the entire time New Zealand was in alert level 4, which we moved into on March 26, so this result is not surprising."

He added that today's numbers were better than Treasury's estimates, which were yesterday revised from a 23 per cent drop, to a 16 per cent contraction.

Finance Minister Grant Robertson said the figures were 'better-than-forecast'. Photo / Mark Mitchell
Finance Minister Grant Robertson said the figures were 'better-than-forecast'. Photo / Mark Mitchell

Goldsmith said the GDP numbers show the Government has failed to keep the economy progressing.

"The numbers reveal a smaller economy with thousands of Kiwis out of work, businesses failing and a massive drop in New Zealand's income."

He said although the economic damage was recorded in three months, it "will last for decades to come".

The recession is because of the economic impact of Covid-19, which forced the country into lockdown in March and April.

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"While level 4 restrictions were in place for most of April, the gradual return to level 1 over the course of the quarter meant that businesses were able to open up again and many people returned to places of work," Stats NZ national accounts senior manager Paul Pascoe said.

National has been critical of how the Government handled parts of New Zealand's economic response.

Yesterday, Goldsmith said it would be a "deep and long" recession but National had a plan to get New Zealand "back on its feet".

It will unveil details of that plan tomorrow.