First prediction of a recession in New Zealand

http://www.interest.co.nz/ratesblog Intro Hello. I'm Bernard Hickey with the weekend edition of the daily briefing from interest.co.nz... Today, we'll look at the first prediction of a recession in New Zealand. The BNZ has made a gutsy call that we may already be in recession and we'll look at the latest productivity figures. They may sound boring but they unlock the secret of why New Zealand's economy is performing so badly. Story 1, But firstly, we look at a very gutsy call from an economist. The BNZ's Stephen Toplis has put it all on the line and come out with a prediction that the New Zealand economy is heading for a recession possibly as early as the third and fourth quarters of this year. That's just over 3 months away. The BNZ's Toplis says New Zealand's economy has become the victim of a near perfect storm of bad news. At the same time as the global credit crunch we have a housing market starting to slump, very high interest rates and a very high New Zealand dollar. We also have high petrol and food prices, which is putting disposable income under a lot of stress. He says interest rates for borrowers are likely to go higher because of the credit crunch and he sees the prospect of credit rationing by the banks. He is now predicting a double digit fall in house prices. He sees rents rising too as money for new developments dries up. An interesting view that will no doubt spark debate. You can do that on the ratesblog on interest.co.nz Story 2 Now for a closer look at productivity figures. Before you go to sleep it's worth pointing out these figures actually reveal why our economy has performed so poorly for the last 30 years. Simply put, productivity growth is crucial for sustainable growth in GDP per capital. Without it, we risk inflation and we risk falling even further behind the rest of the OECD. These figures show a dip during the Muldoon years before a rise back to close to 5% in the Lange/Douglas/Richardson years been 1984 and 1993. Ever since, apart from one blip in 2000, they have been falling and the latest figures show a continuation of that decline since the introduction of MMP in 1996 and the election of the Clark Labour government in 1999. I've put a full explanation on the ratesblog and I'd love your suggestion of how New Zealand can improve productivity. II'm Bernard Hickey from interest.co.nz with the Daily Briefing. Catch you on Monday.