English warns of 'grumpy' growth
A surprise surge in growth in the first three months of the year has delivered some rare good news for the Government, but ministers were yesterday loath to gloat.
Finance Minister Bill English remained cautious after earlier saying the economy was in for a long period of "grumpy growth", warning the lift was not necessarily a sign of better growth ahead.
"It [growth] remains lumpy and grumpy, occasionally you get a good lump," he said.
The economy expanded in the March quarter by 1.1 per cent, against forecasts of close to 0.5 per cent from Treasury and the Reserve Bank. Farming, manufacturing and service sectors all grew at close to 2 per cent.
That took growth for the year to 1.7 per cent.
Mr English said the data confirmed the economy was on track to grow at 2 per cent to 3 per cent.
It would not change the Government's focus on "grinding it out".
"When there's so much uncertainty these numbers are likely to be up and down."
Good growing conditions had boosted agriculture by 2.3 per cent, mainly from an increase in milk production.
He said data could be bumped around by a buildup of inventories, which could be sold in the next quarter.
BNZ economist Doug Steel echoed that, noting on rough calculations inventories were up by 1.5 per cent.
But he also warned that while "growth blew all forecasts out of the water", demand was relatively weak and household spending growth was again soft, though it should pick up over the coming year – especially house building.
Labour finance spokesman David Parker said the country's external debt was expanding.
"Annual growth over the last year of 1.7 per cent is weak for an economy coming out of recession, and what growth we are seeing is being paid for by borrowing that the ANZ bank is calling `the danger zone' and the BNZ is calling `a very clear risk for New Zealand's credit rating'."
Dairying was the biggest growth factor, but the country could not rely on dairy alone.
"We urgently need to modernise the economy with more help for our exporters, universal KiwiSaver, and pro-growth tax reform."
ANZ bank said the data confirmed the economy started 2012 "with a solid degree of momentum" and the second quarter would also be reasonable.
"But the real issue is where growth is going to come from in the second half of 2012."
Mr English said the Government would remain focused on improving competitiveness. "In the long run that's more important than the fluctuations month to month."