Last Thursday’s GDP figures showed a surprise contraction in Q4 of 1% as the border closures hit the New Zealand tourism sector particularly hard. This came on the back of a particularly strong rebound in Q3 13.9%. The slump came as a surprise to most forecasters with market expectations being for a modest 0.2% increase. GDPlive was an outlier, showing a much more pessimistic prediction for Q4 and 2020. However, it seems that the machine learning model was much closer on an annual basis than the human forecasters, raising the possibility of a double dip recession.

By Professor Christoph Schumacher

When the government releases their previous quarter GDP estimates, we always check to see how close our machine-learning predictions were. Prior to the pandemic hitting our shores and our economic fortunes, our forecasts have been very close to official figures, and in many cases spot on.

This time, however, our Q4, 2020 quarterly and annual growth predictions of around -4% and -3.7% respectively were considerably more pessimistic than the just-released values of -1.0% (quarterly) and -2.9% (annual). What could have caused this discrepancy? There are three points worth highlighting.

First, GDPLive is powered by a machine-learning…

So-called zombie companies have been on the rise since the Global Financial Crisis and there are fears that the pandemic will only aggravate the problem. There are concerns that these firms — neither dead nor fully alive — will drain resources from the economy, slowing the recovery and dampening already sluggish productivity growth across most OECD countries, including New Zealand.

Virtually non-existent 30 years ago, by 2019 the number of zombie companies in advanced economies accounted for 13 percent of the total, according to the Bank of America Merrill Lynch. These companies have enough resources to continue to operate but…

New Zealand’s economic rebound in the second half of 2020 is being hailed as a vindication of its COVID-elimination strategy. In the early days of the pandemic, there was a widely-held belief that countries needed to choose between protecting their population’s health and their economy. But have countries with lower infection and death rates seen a larger economic downturn?

Multiple studies from 2020 now suggest the opposite is true. Countries that implemented a strict lockdown early in 2020 as cases began to soar have also recovered faster economically. By contrast according to Our World in Data, those countries that experienced…

The latest OECD economic snapshot of New Zealand warned that despite a rebound in the second half of 2020, the economy was not yet on a firm footing. They recommended the government swiftly implement the infrastructure spending component of the COVID-19 response package to underpin the recovery. The reason for the urgency is that delays in spending risk being too late to play a part in the recovery and can actually be detrimental by overheating the economy. …

Ever since the Global Financial Crisis, the world has experienced low inflation. Despite periodic warnings of inflationary pressures, inflation rates globally have been tracking well below historic averages. Central Banks have deployed loose monetary policy and quantitative easing at an ever-increasing rate to try and inflate global markets and in some cases to avoid outright deflation, but these interventions have been increasingly ineffective.

There have been many theories for the persistently low inflation, from hidden labour market slack to globalisation, but one theory that is gaining increasing attention is the deflationary impact of new technology. Technological advancements, from iPhones to…

By Professor Christoph Schumacher

Like every economy in the world, the COVID-19 induced lockdown sent the New Zealand economy into a nosedive and during the quarter ending in June, our GDP fell by a record 12.2 percent. However, following on from the largest decline in the history of our country was the largest quarterly GDP increase on record. In Q3 2020, our economy grew by 14 percent which leaves us with a manageable annual growth rate of -2.2 percent.

Although the Q3 values were only released today (17th December), the remarkable recovery doesn’t come as a surprise. Economists traditionally watch…

By Professor Christoph Schumacher

Today, the official September 2020 quarter GDP figures were released. After the substantial drop of GDP values due to the COVID-19 induced lockdown, everybody was anxious to see if and how well the economy is recovering. Early indications are that we were doing better than expected. Instead of travelling overseas, New Zealanders were spending more domestically on housing, renovations, consumer goods or national holidays. Official values suggest that our economy grew by 14 percent during the last quarter. This is a remarkable recovery and slightly better than our GDPLive prediction of 13 percent. Annually, economic growth is at -2.2 percent which again, is less severe than anticipated (we predicted -3.2 percent). Overall, the Q3,2020 figures are encouraging, however, the upturn could be severely impacted by the shortage of stock and supplies that we are currently experiencing.