Coronavirus: NZ economy suffers record 12.2pc contraction in June quarter

NZ Prime Minister ­Jacinda Ardern will head into an election having presided over the country’s first recession in a decade.

Prime Minister Jacinda Ardern is expected to be re-elected next month despite the shocking economic figures. Picture: New Zealand Herald.

New Zealand Prime Minister ­Jacinda Ardern will head into next month’s general election having presided over the country’s first recession in a decade, with the economy contracting by a record 12.2 per cent over the three months to June.

The imposition of Melbourne-style stage-four restrictions across the entire country from late March to the end of April drove “by far the largest” drop in real gross domestic product since quarterly records began in 1987, Statistics New Zealand said on Thursday.

“We’ve never seen anything like this,” KiwiBank chief economist Jarrod Kerr said. “It was traumatic.”

The restrictions imposed by Ms Ardern in pursuit of total elimination of the virus were among the toughest in the world. In comparison, Australia’s partial shutdown of its economy in April and May resulted in a 7 per cent slump in real GDP in the second quarter, while the average fall across OECD nations was 10.6 per cent.

Ms Ardern rejected opposition accusations that the measures had pushed the economy “off a cliff”, saying the restrictions helped contain the virus and ­allowed business to resume far earlier than in many countries.

The centre-left leader, who will go to the polls for re-election on October 17, said New Zealand had recorded just 25 COVID-19 deaths, out of a population of five million.

“Success for me is saving people’s lives, supporting and saving people’s businesses, coming out the other side (of the crisis) faster, quicker and with more activity,” she said. “I back our results.”

NZ Finance Minister Grant Robertson said the hit to the economy had not been as bad as ­initially feared, and that “going hard and early means that we can come back faster and stronger”.

JPMorgan chief economist Ben Jarman agreed the rapid suppression of the virus and easing of restrictions should lead to “a strong bounce” in economic ­activity.

Hopes for a powerful V-shaped recovery, however, were tempered by a fresh community virus outbreak in Auckland in August, which triggered a second lockdown in the country’s biggest city. Still, Citi chief economist Josh Williamson said he predicted a solid 6.8 per cent rebound over the three months to September.

The government has pledged $NZ62bn ($58bn) to help revive demand and protect jobs, while the central bank has slashed interest rates and embarked on a bond-buying program to drive down borrowing costs. The Reserve Bank of New Zealand is considering taking interest rates negative.

Additional reporting: AFP, Bloomberg