Flat second half of 2010, reasons for optimism

Statistics issued today confirm the economy was subdued in the second half of 2010, although there are reasons to be optimistic about the outlook for the coming year, Finance Minister Bill English says.

“Gross domestic product figures for the December quarter largely confirm what other indicators have been telling us.

“They reflect slower domestic growth as New Zealanders increased their savings and paid down debt, as well as the significant impact of the first Canterbury earthquake,” Mr English says.

Statistics New Zealand today confirmed GDP increased by 0.2 per cent per cent in the three months to 31 December, leaving annual growth at 1.5 per cent for the year - the highest annual growth for more than two years.

This means the economy has expanded in six of the past seven quarters.

“The economy is making the adjustment it needs to – away from excessive borrowing and housing speculation and towards more savings and debt repayment. It’s important the Government plays its part in this rebalancing by getting its own finances in order and returning to Budget surplus.

“In the short term, this is constraining growth, particularly in domestic sectors like housing and retailing.

“But looking ahead, there are reasons to be optimistic about growth picking up later this year – despite the devastation and considerable disruption of the second earthquake in Christchurch last month.

“New Zealand’s commodity export prices remain around record levels, interest rates and inflation are relatively low, the rebuilding of Christchurch will provide a boost to the regional and national economy, and the Rugby World Cup will attract tens of thousands of visitors.”