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Giving change at the till - Source: ONE News -
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The New Zealand economy is technically out of recession, according to the latest gross domestic product figures from Statistics New Zealand.
GDP - a measure of economic activity - rose 0.1% in the June quarter.
New Zealand has recorded negative economic growth in the five previous quarters, with the March quarter recording a steeper-than-expected 1% drop.
ASB economists predicted the 0.1% growth though most economists, including the Reserve Bank, tipped one more quarter of slight contraction.
The rise was boosted by a 1.5% increase in the primary sector, particularly the fishing, forestry, and mining industries.
In the service sector, real estate and business services increased 1.5% and communications rose 1.7%.
Stronger migration and a rebound in the housing market are seen as key factors in helping the New Zealand economy regain strength.
However, Statistics New Zealand says that since the modest increase is so close to zero "no significant conclusions can be drawn that this is a turning point".
The service sector overall was flat, and a decline in manufacturing and construction led a contraction in the goods producing industries.
An an annual basis, GDP fell 1.8% for the year ended June 2009.
About time
ANZ National chief economist Cameron Bagrie says after 18 months of recession and substantial fiscal and monetary stimulus, such as the Reserve Bank cutting benchmark interest rates to 2.5%, the economy is at a juncture.
He says the big issue facing New Zealand's economy now is the quality of the recovery. At the moment, New Zealand appears to be borrowing and spending its way to growth rather than earning it.
He says the bank expects to see a W-shaped recovery in which the economy will decline again, just as it looks to be on its way up, before truly emerging from the recession.
"That really reflects the fact that when we look at all the variables that we can throw into the pot here around the globe, the exit strategies from the banks is that they move from fighting a global credit crisis to fighting inflation (and) the shifting of housing pressures onto government balance sheets," he says.
While there are no immediate inflation concerns, central banks will be looking to remove some of the extraordinary measures they have had in place during the recession.
"They're in the old proverbial rock and a hard place here because it they move too late they risk generating inflation down the track, and if they move too early they risk choking off the recovery before it's really got underway," says Bagrie.
Bagrie says it is unlikely New Zealand will return to the levels of growth seen in 2007 before the recession when credit growth was "abnormal" and roughly double the rate of nominal GDP.
