Confirmation the economy has suffered at least five quarters of recession underlines the challenges ahead, Finance Minister Bill English said today.
Figures published by Statistics New Zealand (SNZ) today show gross domestic product fell 1 percent in the March quarter, following a revised fall of 1 percent in the December quarter.
On an annual basis, GDP was down 1 percent for the year ended March.
It is the first time since the series started in 1986 that GDP has declined for five straight quarters, while the 1 percent declines of the December and March quarters were the largest for 18 years.
The largest contributors to the annual fall were an 8.9 percent drop in construction and a 5.4 percent fall in manufacturing, SNZ said.
The main contributor to the fall in the March quarter was manufacturing, which dropped 7.2 percent.
Mr English said the data "laid bare" the structural imbalances that had become a "handbrake on the economy".
Over the past decade growth had been fuelled by increased government spending and household consumption funded through borrowing.
"In the past five years, the tradeables sector of the economy - including exporting and manufacturing - has actually been in recession, while the non-tradeables sector has grown reasonably strongly. This has contributed to a deteriorating current account deficit and had stymied New Zealand's economic performance," Mr English said.
"We have plenty of work ahead of us to reverse these structural imbalances, which are clearly worse than we had envisaged."
Labour's finance spokesman David Cunliffe said the Government had to do more to stimulate the economy.
"The economy has shrunk now for 15 months and as a result thousands of kiwis are losing their jobs. It's only human nature that they look for leadership in these times, but this National Government is offering no real solutions," Mr Cunliffe said.
The size of the quarterly decline in GDP could be something of an embarrassment for Prime Minister John Key and also caught many economists by surprise, although the Reserve Bank was bang on with its prediction of the size of the contraction.
At a post-cabinet press conference this week, Mr Key said he believed the economy had performed more strongly than some thought, while on radio he said his advice was that the size of the quarterly decline in GDP would be lower than predicted by the Reserve Bank.
Meanwhile, the median forecast among economists in a Reuters poll was for a quarterly decline of 0.7 percent.
The expenditure measure of GDP fell 0.7 percent in the quarter, with household final consumption expenditure falling 1.4 percent, the largest fall in household spending since 1991.
