By Hayden Donnell

Copyright thespinoff

A highly technical question we sent out to many of the nation’s leading economists.

New Zealand’s GDP figures for the June quarter were released this morning to a rousing chorus of boos, groans and cries of “fml”. The economy contracted 0.9%, three times the 0.3% stupidly predicted by the stupid Reserve Bank. Everywhere you looked, it was bad news. Manufacturing: down 3.5%. Construction: down 1.8%. Service industries: flat. Butter prices: through the bloody roof.

In keeping with Kiwi tradition, the focus quickly turned to who to blame. Finance minister Nicola Willis pointed to the global uncertainty caused by Donald Trump’s trade tariffs; an explanation that had the benefit of being both relatively plausible and also completely out of her control. “The economy had been growing strongly in the previous six months, but suddenly had the stuffing knocked out of it,” she said. “I feel for people and businesses who have been affected.”

Labour, surprisingly, disagreed, reminding everyone the government began 2025 saying its number one priority was “going for growth”; a resolution arguably at odds with growth massively tanking. Its finance spokesperson Barbara Edmunds pointed out Australia’s GDP grew 0.6% last quarter. “They will blame everyone else for their failure and say they just need more time. But the truth is clear: under Christopher Luxon, New Zealand is heading in the wrong direction.”

Who’s right though? We can all agree the economy is absolutely crapola right now, its distended body propped up on a bed of cows, kept alive only by huffing the vapours of past house prices. But really, putting aside the political point scoring, who’s fault is it? The Spinoff tried to answer that question, sending out a highly technical survey to many of the nation’s leading economists.

“Why is the economy so shit?” we asked Kiwibank chief economist Jarrod Kerr. He was succinct. “Quite simply, the Reserve Bank has been mucking around,” he said. “We need interest rates at stimulatory levels. And they could have done that back in May. They mucked around. And here we are with another quarter with a substantial contraction.”

So, it’s the interest rates, stupid. Still, it’s good to get a second opinion. “Why is the economy so shit?” we asked Simplicity’s chief economist Shamubeel Eaqub. He sent back a list blaming growth-stifling Reserve Bank interest rate settings, but also global uncertainty, the government cutting back on capital expenditure during a recession, slowing net migration, and a housing downturn.

Much to consider. “Why is the economy so shit?” we asked Kiwibank senior economist Mary Jo Vergara. She agreed with her colleague. “It’s all just uncertainty right now about what’s happening overseas. It’s stalled some business decisions. Also, interest rates are probably not at levels that are attracting any borrowing from households and investment from businesses.”

The heat was back on the bank. “Why is the economy so shit?” we asked Council of Trade Unions economist Craig Renney. Actually it’s the government’s fault, he said. “It’s in part a reduction in government investment, and in part, a loss of confidence because the government has gone around telling everyone that we need to tighten our belts. The effect of that is everyone has done as instructed, and as a consequence, people aren’t spending any money.”

Economist Sam Warburton said governments don’t actually have much control over the economy, which was suffering a hangover from Covid-era supply chain disruptions and inflationary Reserve Bank interest rate decisions. “Governments can help by getting regulatory settings right, like removing barriers to building housing. But it’s the Reserve Bank that really controls things,” he said. “I’d hate to be a prime minister that claimed to be able to control these things and get the country back on track.”

ANZ’s chief economist Sharon Zollner also blamed a Covid hangover. “Why is the economy so shit?” we asked her. “Well, partly because it was so good, and the bigger the boom, the bigger the bust,” she said. “A certain element of this was inevitable, simply because of the unsustainability of what the economy was doing when it was so massively overstimulated.”

Though The New Zealand Initiative’s Eric Crampton cautioned against reading too much into a single quarter’s results, he rejected the idea that Trump’s tariffs were responsible for the contraction, instead pointing to domestic economic weakness caused by higher interest rates and perhaps some deferred construction in Auckland as the council works to change its planning rules.

“Why is the economy so shit?” we asked Auckland University adjunct professor of economics, Arthur Grimes. “Sorry – not up with enough of the latest figures so no comment from me. Sent from my HUAWEI P20 Pro,” he said, in what will go down as a humble and honest response.

Westpac economist Michael Gordon was less circumspect. “A lot of it is the lingering hangover from high interest rates. So to a large degree, it is intentional,” he said.

All plausible explanations. But were they really getting to the heart of the issue? “Why is the economy so shit?” we asked Simplicity economist Rosie Collins. “I see it as something fundamental to do with values and attitudes towards time,” she said. “The economy is essentially a set of ethical commitments – another name for a set of relationships that determine who gets what and why. Over time, these relationships can be coordinated, collaborative and strategic, or unruly and extractive. Without strong institutions, they tend towards the extractive.”

Collins saw something rotten at the heart of our economy. Lower interest rates could turn around some of our GDP stats, but they wouldn’t establish a more diverse and fair tax base or direct our economic institutions away from the extractive and toward the inclusive. “Without better norms for talking about difficult trade-offs, it is far easier to say ‘we are all in it together’,” she said. “But really, it’s too kitsch, too clean. Some of us are doing far better than others. To make the economy less shit, we have to find ways to talk about and confront class.”

Interesting. Maybe we are operating in some kind of economic system that disproportionately rewards a few at the top while leaving millions at the bottom to fight over a reducing number of scraps. There was still time for one more opinion though. “Why is the economy so shit?” we asked independent economist Cameron Bagrie. “Cyclical tailwinds from the likes of low interest rates are going head to head with massive structural change, uncertainty and weak economic fundamentals. Welcome to the two steps forward but one step back economy,” he said.

Hopefully that settles things.