Finance Minister Grant Robertson has received no advice that NZ will be hit by a recession

Finance Minister Grant Robertson says he's had no official advice to suggest NZ is heading towards a recession as the economic impact of Covid-19 continues to hammer markets. Photo / Mark Mitchell

Finance Minister Grant Robertson says he's had no official advice to suggest New Zealand is heading towards a recession as the economic impact of Covid-19 continues to hammer markets.

This comes after the BNZ said the risk of a recession in New Zealand was now "probable".

Robertson has also revealed the Government was working through the details of taking in more debt in a bid to stimulate the economy.

That could involve breaking the Government's Budget Responsibility Rules (BRRs) which were only meant to be broken in the event of a significant economic shock.

Asked if New Zealand will move into a recession, Robertson told Newstalk ZB that was "not the advice I'm getting at the moment for the Treasury".

A recession is two negative quarters of GDP growth. Many economists are picking the first quarter of the year will be in the negative territory.

Even Robertson appears to be sympathetic to this commentary.

"The advice I'm getting is growth will be pretty hard to come by in the first quarter," he said.

"We will have to see how we go in terms of containing the virus and how the rest of the world reacts to it in terms of the second quarter."

But he did admit that the economic impact of coronavirus would "affect the economy for the rest of the year".

The comment appears to show that Robertson is now expecting a more significant economic shock than had previously been anticipated.

He had initially picked a "short, sharp shock" to the economy – something he described as "scenario one", where there is a significant impact on the New Zealand economy across the first half of 2020, before a rebound later in the year.

But his comments this morning that the economy will be affected "for the rest of the year" imply he is now expected scenario two.

"The second scenario is based on a longer-lasting shock to the domestic economy, as the global impact feeds through to the economy for a period of time."

And to cope with this economic impact, Robertson is "working through" plans to take on more debt.

The yield on kiwi bonds are at an all-time low – meaning it's never been cheaper for the Government to borrow money.

"We've got the fiscal space to move as we need to," Robertson told ZB this morning.

Speaking to RNZ, he said: "It's pretty clear that we're moving into uncharted territory here."

"When we set out the budget responsibility rules we were very clear that [they were] subject to… a global economic shock."

Those rules dictated that the Government had to keep its debt no higher than 25 per cent of New Zealand's total GDP, unless there was a big economic shock.

"So we will take a look at that," he said of the debt limit.

"The good news is we have net core Crown debt lower than what we inherited so we are in a strong position to respond."

He wouldn't say how much money the Government was looking to borrow.

"That will all be decided as we develop the budget process."