Leading economist says Aotearoa's economy at 'bottom edge' compared to other developed countries

A leading economist says Aotearoa's economy is at the "bottom edge" when compared to other developed countries after the Government swung open its books.

On Wednesday, the Government set out the Pre-Election Economic and Fiscal Update (PREFU) which revealed a surplus has been pushed out a year amid a lower-than-expected tax take.  

Finance Minister Grant Robertson said this comes as the global economy slows down but was quick to point out there is no sign of another recession, solid unemployment numbers and inflation returning to the normal band next year. 

Robertson said New Zealand's economy is "turning the corner". 

HSBC Australia and New Zealand and Global Commodities chief economist Paul Bloxham joined AM on Thursday and said the latest numbers show New Zealand is at the "bottom edge" when compared to other developed countries. 

Bloxham believes there needs to be a strong focus on "lifting productivity and growth engines" for the economy, otherwise, Aotearoa runs the risk of not returning to being a rockstar economy like it was in 2014.  

He told AM "there's a lot to be done" with many opportunities to do it - "but action needs to be taken". 

The prickly challenge New Zealand still faces is that inflation remains "too high" and Bloxham said it is moving in the right direction but "it's still too elevated". 

"For it to come back down the economy needs to be growing more slowly for a longer period of time." 

For that to happen, Bloxham said demand needs to run below supply to get inflation back in its box. 

"I think the primary concern is still that growth needs to be weak for a while in order to get inflation down, and that presents some pretty decent challenges." 

Bloxham believes inflation is the main issue facing the economy and warns interest rates "aren't going down any time soon". 

"The sooner we can get a focus on growing the economy, improving the supply side and getting productivity to lift, the soon we can expect that, the central bank can consider that it doesn't need to keep putting pressure on the economy - it doesn't need to keep those higher interest rates." 

Bloxham said Kiwis should expect interest rates to remain elevated "for a while yet" because the supply side is weak and inflation "is still too elevated". 

Watch the video above for more.