Gross domestic product (GDP) figures out yesterday showed the economy contracted for the fourth consecutive quarter in December, giving New Zealand a year of recession.
In a move now familiar among politicians of all parties, Finance Minister Bill English said the global recession and the previous Labour-led government's "damaging economic legacy" were behind the economy's fourth consecutive quarter of contraction in December.
"However, the new Government is moving swiftly to both manage the immediate challenges of recession and to build a credible medium to long-term plan for rebuilding the economy."
The Government was moving into the next phase of its Jobs and Growth plan, removing the red tape getting in the way of business and investment, ensuring the state sector delivers better and smarter public services and bringing forward infrastructure investment that would contribute to a higher productivity economy.
Mr English blamed Labour for allowing serious structural imbalances to build up over several years, which meant the country was one of the first to fall into recession early last year.
The budget would set out a "responsible and credible plan" to increase productivity and incomes.
"We will do this in a way that also recognises our pressing need to get the Government's own finances and debt position in order," he said.
Bank of New Zealand markets economist Stephen Toplis took a more practical approach to the GDP data, which showed New Zealand's economy was 1.9% smaller in December than it was in December 2007.
"In an absolute sense, the New Zealand economy looks miserable but relatively, things are just fine thanks. While the rest of the world is imploding spectacularly, the New Zealand economy is, so far at least, shrinking in a fairly orderly fashion."
While yesterday's data was miserable and there was more misery to come, it was not surprising.
It would have little impact on market pricing or the Reserve Bank's thinking, he said.
Far more disconcerting for the Reserve Bank, and the economy as a whole, had been the recent unsolicited and unwelcome tightening in monetary conditions.
The combination of the sharp rise in the New Zealand dollar and the ongoing increase in swap rates was acting as a contractional force on the economy at a time when that was most undesirable, Mr Toplis said.
The shift in the dollar was more about the weakening of the United States currency than anything fundamental about New Zealand. The pick up in swap rates reflected the borrowing community finally waking up to the reality that yield curves were steepening.
For now the recession rolled on. The fourth consecutive quarter of negative GDP growth matched the nasty string of results reported in 1989-90.
Mr Toplis' first forecast for the first quarter of this year was for a further contraction of 0.6% with another negative second quarter.
That took New Zealand back to 1977-78 for a point of equally miserable comparison.
"We do believe growth will come back to these fair shores as the year wears on. But for those looking for a return to the heady days of the late 1990s and early 2000s, think again."
