News release

From: Motu Economic and Public Policy Research Trust

New research from Motu offers a clearer way to judge how the economy performs in booms and busts.

When the economy grows or shrinks, we often focus on how long the phase lasts or how deep it goes. This paper asks a sharper question: how does actual growth compare with steady, quarter-by-quarter growth over the same period? The authors Viv Hall (Victoria University of Wellington), John McDermott (Motu Research) and Peter Thomson (Statistics Research Associates) develop three new measures that track the shape of each business cycle phase.

They calculate the gains or losses that sit above or below a constant quarterly growth path. This lets us see whether a recession hits harder than it “needs” to — or whether an expansion delivers more than steady growth would suggest.

In plain terms, the measures show whether New Zealand experiences excess pain during downturns or extra gains during upswings.

The approach builds on earlier work by Harding and Pagan (2016) and turns it into practical tools with clear economic meaning. The results also lend themselves to simple graphs that make the story easy to see and explain.

The researchers apply the measures to New Zealand’s past recessions and expansions.

The findings give policymakers and the public a more precise way to judge economic performance — not just by how long a phase lasts, but by how well it delivers for people and businesses.

Better measurement leads to better decisions.

By sharpening how we assess economic ups and downs, this research helps us respond faster, plan smarter, and aim for stronger, more stable growth in the future.