GDP Data Highlights Challenges, But Signals Economic Recovery Ahead

According to Stats NZ, the GDP contraction reinforces the ongoing impact of a prolonged cost of living crisis, prompting the Reserve Bank to maintain elevated interest rates to combat inflation.

Finance Minister Nicola Willis has commented on the latest Gross Domestic Product (GDP) data for the June 2024 quarter, which shows a 0.2% decline, reflecting the challenges posed by an extended period of high interest rates. However, she noted that recent indicators suggest the New Zealand economy is beginning to recover.

According to Stats NZ, the GDP contraction reinforces the ongoing impact of a prolonged cost of living crisis, prompting the Reserve Bank to maintain elevated interest rates to combat inflation. “Today’s GDP data confirms the economic struggles we’ve faced,” Willis said. “But the resilience of the New Zealand economy is evident, and recovery is on the horizon.”

She pointed to encouraging signs, such as a forecasted inflation rate of under 3% for the current quarter, suggesting a potential end to the severe price increases that have burdened households. Additionally, in August, the Reserve Bank cut the official cash rate by 25 basis points—the first decrease since 2020—offering relief to households with mortgages and businesses alike.

“Business confidence is also on the rise, with recent reports indicating the highest levels in a decade. This optimism is crucial, as many businesses are now poised to hire, invest, and grow,” Willis noted.

While acknowledging that challenges remain, she expressed confidence in the Government’s strategic approach to economic recovery. “Brighter days are ahead. Our careful and deliberate plan is laying the foundations for a stronger economy, but there is still work to be done,” she concluded.