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AAP
AAP
Politics
Ben McKay

Recession politics the latest NZ Labour blow

Auckland floods, Cyclone Gabrielle are behind the NZ recession, Prime Minister Chris Hipkins says. (Andrew Cornaga/AAP PHOTOS) (AAP)

In an election campaign expected to be hyper-tight, a hammer blow arrived for the government in the form of a wafer thin margin.

The Kiwi economy's contraction of just 0.1 per cent, confirmed in GDP data last week, put New Zealand in recession.

The fresh figures will have little consequence for the New Zealand economy, given the pandemic-induced economic slump was already known.

However, it is a political game-changer ahead of the October 14 election, giving the opposition National party a mighty stick with which to beat the Labour government.

Within minutes of the data release, National sent a fundraising effort to the party faithful, began a social media advertising campaign and a media blitz.

"Labour has mismanaged the economy and New Zealanders are paying the price," Finance Spokeswoman Nicola Willis said.

The cashed-up opposition will be sure to remind Kiwis of the recession many times in months ahead.

Scratch behind the GDP numbers, and the 0.1 per cent reversal was actually rounded up from 0.064 per cent.

In real terms, it's a tiny figure, of just $NZ45 million ($A41 million).

"It's sort of a margin of error," Prime Minister Chris Hipkins lamented.

"It's election year. I'm sure our opponents will make will make much of it."

The confirmation of a technical recession - two straight quarters of negative growth - comes after a tough month for the government.

A stream of bad news has followed the release of the budget on May 18.

First came the Reserve Bank hiking rates for the 12th straight meeting.

Education Minister Jan Tinetti was referred to the privileges committee for failing to correct a parliament blunder.

Transport Minister Michael Wood was stripped of his portfolio after he failed to sell shares in Auckland Airport, despite being reminded an astonishing 12 times by the cabinet office.

Mr Hipkins' first speech at a party conference as leader was upended when National withdrew support from a bipartisan housing accord, leaving Labour isolated in its support for unpopular densification.

Labour was wedged again by National when it announced a farmer-pleasing policy of kicking out action to price agricultural emissions by five years.

Even when Labour thought they'd caught a break, it failed to materialise.

Last week, opposition leader Chris Luxon was captured on a microphone describing New Zealand as "a very negative, wet and whiny, inward-looking country".

While Mr Hipkins did his best to call out the assessment as unpatriotic, it turns out Kiwis agreed with Mr Luxon.

An online survey by news outlet Stuff showed a majority agreed with the assessment, which Mr Luxon later said was meant to describe the government.

Above all, the government's biggest challenge is the economy, which remains in low gear.

Mr Hipkins said two major weather events, Auckland flooding and Cyclone Gabrielle, were behind the tiny GDP reverse.

"Governments don't get to determine the weather, but we do have to respond to the events dictated by the weather," he said.

There are green shoots for the government to cling to, including the peculiar features of this shallow downturn.

"When you think about what a recession is in peoples minds, it's a period when people are losing their jobs and their wages are going down," Finance Minister Grant Robertson told Newstalk ZB.

"In this quarter ... that didn't happen.

"We hit this with unemployment at 3.4 per cent, we've got wages in the period covered by this growing on average by 7.6 per cent."

It will also receive new GDP data on September 19, a fortnight before polls open.

Labour believes that will show an economy on the up, buoyed by the rebuild from the cyclone - the same storm that dumped New Zealand in recession in the first place.

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