New Zealand’s economy shrank by 0.2 percent in the second quarter of 2024, according to official data released by StatsNZ on Thursday. This marks a further slowdown following weak growth of just 0.1 percent in the first quarter, pushing the country closer to a technical recession.
High inflation, elevated borrowing costs, and a struggling housing market have dampened consumer spending, while falling exports in the dairy sector have added to the economic strain.
While two consecutive quarters of contraction typically signal a recession, economists believe New Zealand is already in a prolonged downturn. “We’ve recorded a triple trough in economic activity. But it’s effectively a recession that’s lasted two years,” Kiwibank chief economist Jarrod Kerr explained. He added that the GDP report “told us what we already knew. New Zealand remains in a prolonged recession.”
Despite the bleak outlook, Finance Minister Nicola Willis remained optimistic, attributing the economic challenges to high interest rates imposed by the Reserve Bank of New Zealand to combat inflation. She acknowledged that the economy faces further hurdles but stressed that recovery is on the horizon. “The New Zealand economy is resilient, and it will recover,” Willis said, even as forecasts predict another contraction in the coming months.
The Reserve Bank may face increasing pressure to lower borrowing costs, especially after the US Federal Reserve’s recent rate cut, as New Zealand grapples with its economic challenges.