Is the recession over?

The recession stated in the first quarter of 2008, and Treasury is saying it thinks it may be over. Later this month we’ll get June quarter GDP which is expected to be negative, but September quarter they believe will be positive.

The iPredict market tends to agree with the price for negative GDP growth in September being just 18c, or 18%.

If this is correct, unemployment may peak at below 8%, which would be good.

As I blogged yesterday though, prospects for strong growth are weak. This will not be like the period from 1993 to 2007 where strong growth led to so much increased tax take that one could significantly increase spending every year (and reduce taxes or have a big surplus).

NZ is likely to maintain a fiscal deficit for many years, during which time restraint on state sector wages and other state spending will be important.