Q2’s travel bubble boost popped

The Q2 GDP figures were very positive as a Level 1 economy and the brief opening of the trans-Tasman bubble brought a surge of retail and travel activity.  2.8% quarterly growth was well ahead of our relatively optimistic 1.5% pick and the RBNZ’s 0.7% forecast from its August Monetary Policy Statement.

On the face of it that is an astonishing achievement, particularly coming after 1.4% quarterly growth in Q1.  Ahead of this lockdown, the economy was in aggregate on a tear.  And revisions meant the measured dip in activity during last year’s Level 4 lockdown wasn’t quite as deep.

There are a few cautionary tales in the Q2 outcome.  The growth was heavily driven by the opening up of the trans-Tasman bubble, which has been well and truly popped for the time being by the delta outbreaks on both sides of the Tasman and means all that Q2 travel surge will get unwound in Q3.  Meanwhile, domestic spending by households – as reported – was surprisingly slow.  There was also what appeared to be a surprisingly modest outflow of spending by New Zealanders crossing the ditch.  There are challenges in measuring activity accurately when there has been so much reshaping of industry and seasonal patterns.  Still, there were plenty of positives.  Agriculture boomed, up 5%.  Construction, manufacturing, arts and recreation services & professional/business-related services performed solidly.

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Mark Smith

Senior Economist

Mark joined ASB in 2017, with over 20 years of public and private sector experience working as an economist in New Zealand and the UK.

His resume includes lengthy stints at ANZ and the Reserve Bank of New Zealand, and he has also worked at the Bank of England, HM Treasury and the New Zealand Transport Agency. Mark's areas of specialisation include interest rate strategy, macro-economic analysis and urban economics.

Born and bred in the Waikato, Mark studied at Waikato University where he graduated with a Master of Social Sciences, majoring in Economics.

Mark's key strengths are the ability to use his extensive experience, inquisitive nature, analytical ability, creativity and pragmatism to dig a little deeper and to deliver common sense solutions to tackle complex problems.

When not at work Mark likes to travel, keep fit and spend time with his friends and family.