GDP fall no surprise

Media Release
September 29th, 2000

GDP fall no surprise

The decline of 0.7 per cent in New Zealand's GDP for the June quarter came as no surprise; we predicted it six months ago, the Employers & Manufacturers Association (Northern) says.

"Back on March 30th we said the growth then could not be sustained at a time when the banks and Government were congratulating themselves on what has proved to be a short term growth spurt based on domestic consumption," said Alasdair Thompson, EMA's chief executive.

"We repeated warnings about the risk of recession on May 15th and May 17th, both before and after the Reserve Bank raised interest rates by 0.25%.

"At the time all the bank economists were predicting our exchange rate would go up. We said it was overvalued and would go down.

"The economy will at best remain flat or decline further this quarter ending September. Officially that means we are in a recession.

"The relatively low dollar should have been beneficial for exporters much more than it has been over the past year, especially since world commodity prices such as for dairy products have been very strong.

"The signs of our business success have been incredibly muted.

"Now, with our currency buying less from overseas, and everyone facing increased costs, the answer does not lie in awarding ourselves higher salaries, wages and dividends. That would just drive interest rates up, and increase unemployment.

"Of course we have to save more, but more important is we have to invest more wisely. Mediocre investment performance is no longer tolerated - New Zealanders are diversifying their investments offshore though it is badly needed for new projects at home

"Growth won't happen without the development a vision of ourselves that clearly defines what we want, then sets out the policies and plans for how we are going to get to achieve it.

"Most of all we need leadership that endows confidence, and attracts investment into education and wealth creation business.

The PM's meeting with 70 business leaders on October 24th is a start. It is to be commended. We hope the secrecy surrounding the event will not extend to the outcome from it."

Further comments: Alasdair Thompson tel 09 367 0911 (bus) 09 303 3951 (hme) 025 982 024

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