Structural imbalances that have become a handbrake on the economy are laid bare in gross domestic product data for the March quarter issued today, Finance Minister Bill English says.

The New Zealand economy posted its fifth successive quarter of contraction in March, falling 1.0 per cent in the quarter and 2.7 per cent between the March quarter 2008 and the March quarter 2009. The latest quarterly decline was driven mainly by manufacturing activity - down 7.2 per cent.

“This Government is determined to close the income gap that has opened up between this country and our trading partners, particularly Australia,” Mr English says. “For that to happen, we must address the serious structural imbalances that have become clearly evident over the past decade, when New Zealand’s growth was fuelled by borrowing and consumption.

“It’s essential that we build our road to recovery on investment and exports, which will provide the new jobs and productivity gains we need.”

In the past five years, the tradeables sector of the economy - including exporting and manufacturing – has actually been in recession, while the non-tradeables sector has grown reasonably strongly. This has contributed to a deteriorating current account deficit and had stymied New Zealand’s economic performance.

“This situation is clearly unsustainable, particularly as we are facing the considerable added pressure of the worst global recession in more than 60 years,” Mr English says.

“Budget 2009 has laid the solid foundations for our recovery, but we have plenty of work ahead of us to reverse these structural imbalances, which are clearly worse than we had envisaged.

“That will be our focus over the coming year. We will be pressing ahead with our regulatory reforms, with our multi-billion dollar investment in productive infrastructure, and with providing better, smarter public services.”