As if we didn’t already know, the first half of 2009 is turning out to be a real stinker.

Today’s economic growth statistics, showing a 1% economic contraction in the first three months of the year, were worse than the “green shoots” enthusiasts had been expecting and, just for good measure, the contraction in the last quarter of 2008 was revised to 1% as well.

March quarter to March quarter, the economy has shrunk by 2.7% over the last year and we now have the first full-year economic decline since 1992.

While the March balance of payments deficit looked a little better, although still at a whacking 8.5% of GDP, it was collapsing imports that drove the improvement, somewhat offset by a fall in exports.

At the same time, the country’s net liabilities to foreigners rose to 98.2% of GDP, as foreign funds flooded back into New Zealand over the first three months of the year to shore up our shortfall with the rest of the world. The danger that that support could dry up some day is as real as it ever was.

It’s likely that the three months to June 30 won’t be much prettier. While New Zealand’s unemployment rate, at 5%, is still lower than OECD counterparts, concentration in the last few days on figures that make the downturn real – 1,000-plus dole registrations a week – have dented the fragile mood of optimism shown in the only leading indicator out this week, the Westpac-McDermott Miller consumer confidence index.

Even this was a mixed bag.  A net 29% of people still think they’ll be worse off in a year’s time. While that’s a big drop in pessimism from three months earlier, the uptick in consumer sentiment is largely driven by a sense that we must be through the worst and that the five-year horizon looks a bit brighter.

There’s also a sense that there are some damn good bargains out there for whiteware, televisions and cars. That’s got to be the main reason for a net 16% saying they think now is a good time to buy a major household appliance, although lower interest rates and the April tax cuts may also be prising the national wallet ajar.

Meanwhile, the Government’s honeymoon is waning fast, with the political commentariat increasingly skeptical that the Beehive is capable of controlling its own agenda.  Its PR blunders are increasingly only mitigated by force of the Prime Minister’s personality, while a tangle of major policy initiatives threatens to turn the perception of “can do” into “too much to do.” With public hearings on the super-city plan now in sight, expect a bruising few weeks ahead in the country’s most-important political marketplace, Auckland.

Add to this a string of gruesome murder trials dominating the news agenda and I, for one, can’t wait till spring.

That’s when some sort of slow economic pick-up should start to kick in and, if it’s going to happen, we should see that reflected in more leading indicators over the next few weeks.  The National Bank’s monthly Business Outlook is one of the most-watched, and is due next week, while the NZIER Quarterly Survey of Business Opinion is due the following week.

Perhaps the biggest worry in all of this, however, is the direction of the New Zealand dollar. It took a mild hit after the GDP numbers, but with our interest rates looking attractive by global standards and a collective sigh of relief apparent among savers in Japan and Europe about the world economic outlook, there appears to be plenty of support for the Kiwi over coming months.

Quite apart from anything else, a flood of new uridashi and eurokiwi bond issues through July and August appears likely to be well-supported and, in turn, provide support for the Kiwi.

Yet the strength or weakness of the dollar is perhaps the most important determining factor for how quickly or slowly the economy recovers, with Finance Minister Bill English reiterating the importance of a resurgent export sector to overcoming the big structural imbalances which this week’s current account and GDP figures have again laid bare.

“In the past five years, the tradeables sector of the economy – including exporting and manufacturing – has actually been in recession,” says English. At the same time, 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,” he said. Well spotted, Bill.

The question remains, however, where the sustainable upturn will come from. If, as expected, the global economy is starting to turn for the better, then the most stimulatory fiscal conditions for a generation or more should underpin local consumer confidence, along with booming inward migration as refugees from worse-affected economies come home to try again here. But that doesn’t make a jot of difference to the success of New Zealand exporters.

As new research in the latest Reserve Bank Bulletin shows, New Zealand firms have very high failure rates in export markets, with the vast majority of export relationships failing within a year of being established, and kiwi exporters generally forced to transact in currencies other than our own.

The long-term answer to that remains the “200 things we have to get right,” as English put it recently when discussing the need for big productivity gains to close our own gaps, let alone those with the rest of the world. Far too few of those policies are evident yet and, in the sense that prescription has barely changed over the years while commitment to the cure remains lacking, the more things change, the more they stay the same.