New Zealand’s economy is showing signs of recovery, exiting a recession in the 2024 December quarter with growth of 0.7 percent.
Although 1.1 percent lower than a year ago, it has exceeded expectations, which had anticipated quarterly growth of 0.3 percent.
The two previous quarters showed the economy contracting. There was a 1 percent fall in the three months to September 2024 compounded by a 1.1 percent drop to June—the largest declines since late 2021, during COVID-19 lockdowns.
Excluding those contractions, the combined six-month fall was the largest since mid-1991.
The main drivers of GDP growth in the December quarter were agriculture, up 1.4 percent, retail, which rose by 1.9 percent, and transport, which went up 2.4 percent.
However, these were partly offset by 3 percent falls in construction—mostly residential— and telecommunications and internet services.
Also up, after eight consecutive quarters of decline, is GDP per capita, which increased by 0.4 percent.
NZ Council of Trade Unions Economist Craig Renney pointed out that unemployment has risen while business investment has fallen.
“We are still very far away from being back on track,” he said.
“Our GDP per capita fell 2.2 percent from last year [and] is lower than it was in 2021. Real household spending on durable goods, which is a key measure of consumer confidence, was 2.6 percent lower than December 2023.
“Data also shows that wages rose far less quickly than profits—asking questions about where the benefits of this growth are going.”
Renney noted that overall, wages grew 1.7 percent, much lower than profits which rose 5.7 percent.
First Step to Recovery
Kiwibank Senior Economist Mary Jo Vergara said today’s figures were “the first step in the economy’s recovery. Green shoots have certainly emerged, but it must still be noted that there were pockets of significant weakness in today’s scorecard.“High building costs and a still-sluggish housing market is not an environment conducive to a lift in construction activity.
“Meanwhile, everything within the professional services landscape, from business services to public admin to media, continues to suffer under the weight of a deteriorating labour market. The number of total hours worked continued over 2024 fell a chunky 2.5 percent.”
However, the bank foresees better times ahead.
“The outlook is positive,” Vergara said.
“The Reserve Bank has delivered 175 basis points of rate cuts since August, with more on the way. With each cut, the restrictiveness of the current environment eases. In time, this easing should translate into stronger economic activity.”
Finance Minister Nicola Willis said the growth in GDP was “confirmation the economy has turned the corner.”
“It is also pleasing to see that exports increased 3.5 percent in the quarter, fuelled in part by increased spending by international visitors in tourism-related industries such as accommodation, restaurants and bars, transport, and vehicle hiring,” she said.
“We still have a way to go to get to where we want to be, but with economic forecasters predicting further growth in the quarters ahead, things are looking up.”
