The economy grew solidly in the final quarter of last year, but more work is needed to ensure a sustainable recovery that creates jobs and lifts the incomes of New Zealand families, Finance Minister Bill English says.

GDP data issued today shows the economy grew by 0.8 per cent in the December quarter, broadly in line with expectations. Growth was led by the manufacturing sector, which expanded for the first time in almost two years.

A small revision pushed growth in the September quarter to 0.3 per cent, but the economy contracted by 1.6 per cent in 2009 compared with the year before.

"These figures are another step in the road to recovery, but we are still regaining ground lost during the global crisis and New Zealand's own recession which started in early 2008," Mr English says.

"Our economy faces numerous challenges and that is reflected in consumer confidence figures which have dipped in the first part of this year.

"Those challenges include a still fragile global recovery and serious imbalances in our economy built up from years of rampant government growth under Labour and too much borrowing for housing and consumer spending.

"Those imbalances have held back the export sector for several years and meant real per capita GDP was actually negative in the three years to September, 2008 - at a time when other economies were growing strongly.

"The Government is committed to tackling these challenges. The Budget in May will set out the next steps to lift economic growth by tilting the playing field towards productive investment, exports and new jobs.

"We are also putting the brakes on the rapid increases in Government spending that occurred under the previous Government.

"That is vital if we want to raise the competitiveness of our exporters, lift business confidence, increase incomes and help New Zealand families get ahead."