Corrected data shows NZ technically did not have a recession this year after all, despite the headlines in June, says Nick Stewart.
OPINION
Amid other debates, this year’s general election has provided fertile ground for economic speculation.
Who will commit to what for tax or fiscal policy, essential services, education, social support structures … all lined up against the backdrop of what any of this might mean for New Zealand’s economic outlook.
The word “recession” has been steadily bandied about since 2022 by those attempting to divine the way forward. Recessions are obviously not a positive prediction; in a literal sense, they are simply negative economic growth for at least two consecutive quarters irrespective of the quantum.
But this trend can only be observed retroactively. Often by the time we are in a recession, we’re already out the other side.
It doesn’t help that our nation’s statisticians produce our GDP (gross domestic product) data three months post-event, which in a digital age makes the Pony Express seem quick.
Anyone reading the stars to determine what’s coming next is looking through the wrong end of the telescope.
Corrected data shows NZ technically did not have a recession this year after all, despite the headlines in June.
The revised data shows a flat 0.0 per cent in the first quarter of 2023, followed by a 0.9 per cent rise in the June quarter.
It is looking likely we have dodged it for now if GDP continues to exceed growth expectations. We still have high interest rates and challenging variables such as employment, inflation and economic growth, plus consumer and business confidence.
There’s valid interest in these things - they will impact our lives in the short term. The problem is that while talking heads might speculate on how a trend will play out, this is not an economic fact. It’s the other way around.
Markets do not wait for official confirmation. As new information is quickly built into prices, markets already reflect the collective expectations of participants about the odds of recession.
Currently we’re a nation that has little choice but to become good at waiting. For example, we are now waiting on the official line-up of the incoming coalition government, given no one (or two) parties had a clear majority.
They will surely have a mighty task ahead of them given the dire economic environment in New Zealand following a disastrous few years.
We’re still well above the desired inflation level of 2 per cent, with the cost of living sky-high and a housing crisis making it difficult even for those with freer funds to fix a roof over their heads.
While the recent consensus seems to be in the nature of “not as bad as it could be” or “not as bad as we thought it would be”, New Zealand is by no means out of the woods yet – or can we even be certain we are walking the right way.
Many will shrug at the slightly less painful economic trajectory, as the usual spring fiscal awakening appears subdued in 2023.
Unlike elections, we cannot count on a schedule for financial markets to change or react. Prices already reflect a recession’s impact on business earnings and the broader economy before the actual economic activity is reported. Rather than trying to predict and time markets, investors are better to ignore any fervour and stick with their long-term plan.
We can all benefit from support and qualified advice. This is where engaging a trusted fiduciary can help; even better if they’re local, so you can meet face-to-face. Developing and implementing a plan built for your goals and timeframe is much less of a burden when shared with trusted professionals, who can offer unbiased, evidence-based advice.
And remember, while we should always be planning for our financial future – markets themselves are not observable in advance, so there is little point agonising over each bit of “forecasted” economic movement.