The latest GDP figures show the New Zealand economy has contracted again, with Kiwibank saying the country has “effectively” been in a recession for two years.
The economy shrank by 0.2% in the three months to June, Stats NZ announced this morning.
The industry sectors to fall in the quarter were retail trade and accommodation, agriculture, forestry, and fishing. Wholesale trade industries also fell.
The numbers were slightly better than those forecast by economists and come after a difficult 18 months in which growth has been stagnant, sitting either side of the 0% mark.
The annual rate of growth to the end of June was also -0.2%.
“Activity in retail trade and wholesale trade has been in steady decline since 2022,” Stats NZ’s national accounts industry and production senior manager Ruvani Ratnayake said.
Kiwibank chief economist Jarrod Kerr said: “We’ve recorded a triple trough in economic activity. But it’s effectively a recession that’s lasted two years.
“Today’s economic data was weak, maybe not as weak as expected, but still weak.
“Forward-looking indicators suggest that the current September quarter will record another contraction. That makes the recession two years old.
“It’s not until next year that we expect to see some growth. 2025 will be a better year than 2024, and let’s forget about 2023.”
Despite the overall fall in GDP, seven out of 16 industries saw an increase, with the largest rise in manufacturing.
New Zealand had previously been in recession – defined by two quarters of negative growth – between October 2022 and March 2023 and again between July and December 2023.
Stats NZ revised its numbers for the March quarter, saying growth was a wafer-thin 0.1% – it had previously put the figure at 0.2%. That still officially brought the country out of recession.
However, a 1News Verian poll in August found a small increase in optimism with 41% of those surveyed saying they thought the economy would improve in the next 12 months, while 39% said it would stay the same and 19% get worse. Those expecting an improvement was up from 35% in June.
Inflation, interest rates on way down
There are some positive signs in economic data with inflation coming under control, leading the Reserve Bank to cut the Official Cash Rate by 25 basis points in August.
That was the first reduction in four years and retail banks have followed, trimming their mortgage and savings rates. Unemployment numbers, on the other hand, are up, while the Government introduced small tax cuts at the end of July.
Finance Minister Nicola Willis said after the OCR was cut: “It is still tough times for many people, we’re very conscious of that, so we’ve got to get on and do our job of rebuilding the economy.”
Labour warned at the time “thousands of New Zealanders” would lose their jobs and said the tax cuts might fuel inflation.
Kiwibank reaction
In a statement after the announcement, Kerr said the recession would lead to more unemployment, which, according to the bank’s calculations, would exceed 5% by the end of the year.
He called today’s report “miserable” and said it proves that “restrictive monetary policy has done enough damage to restrain inflationary pressures”.
“Enough is enough. And the RBNZ are responding – late, but in earnest.”
Kerr said that an official cash rate cut in October is “as close to a done deal as you get”.
“Effectively, the RBNZ are cutting today for an economy at the end of 2025, the start of 2026. Get moving.”
‘It will recover’ – Willis
Finance minister Nicola Willis said the drop “reinforces how an extended period of high interest” had created tough times for families and businesses but believed the economy was starting to “bounce back”.
“Today’s GDP data confirms what we already know – that the economy has been suffering the after-effects of a long cost of living crisis, with the Reserve Bank having to keep rates high to tackle inflation.
“But the New Zealand economy is resilient, and it will recover. Forward-looking data shows the work we are doing to rebuild the economy is already having an impact and green shoots of recovery are coming through.
She said conditions for households were also starting to ease, with inflation forecast to be under 3% this quarter.
Willis also said some businesses and households were “feeling a lot better” about the future.
“It’s pleasing to see many businesses have the confidence to hire, invest and grow once again,” she said.
“Brighter days are ahead. There is still more work to do, but our careful and deliberate plan is laying the foundations for economic recovery.”
‘The results speak for themselves’ – Labour
Labour’s finance spokesperson Barbara Edmonds said the economy has “failed to grow” since the coalition Government came to power.
“The results speak for themselves. Nicola Willis’ hit list is now higher unemployment, low GDP, and record high migration as Kiwis look to escape the effects of her poor financial decisions,” she said.
“Factories are closing across the country because the government is not taking meaningful action. Nicola Willis’ cuts to the public sector and pausing of infrastructure projects is driving our economy deeper into a recession.”
She accused the Government of having “no plan to grow the economy”.
“The continued cuts are doing nothing to help improve the worsening economic conditions or drive productive growth.
“Almost a year into her tenure as finance minister, it’s time Nicola Willis took some responsibility, invested in growing the economy and stopped the cuts.”
