New Zealand’s Economy Narrowly Avoids Recession with 0.2% Contraction in Q2 2024
New Zealand’s gross domestic product (GDP) fell by 0.2 percent in the June 2024 quarter, according to the latest data. This contraction was better than predicted by the Reserve Bank of New Zealand (RBNZ), which had forecasted a fall of 0.5 percent. The revised figure for the March quarter, originally set at 0.2 percent growth, was downwardly revised to 0.1 percent. While this revision was disappointing, it was enough to prevent the country from entering a technical recession, which is typically defined as two consecutive quarters of contraction.
The weak economic activity in New Zealand was attributed to high interest rates, which restricted spending. Sectors such as retail trade and accommodation, agriculture, forestry, and fishing, as well as wholesale trade, all experienced declines. The forestry and logging industry, in particular, drove the fall in the agriculture, forestry, and fishing sector due to a decrease in exports of forestry primary products.
Despite the overall fall in GDP, there were some positive signs in the economy. Manufacturing saw a significant increase of 1.9 percent, driven by the rise in transport equipment, machinery, and equipment manufacturing. This was the largest rise in manufacturing activity since the December 2021 quarter. Household spending also showed a slight increase of 0.4 percent, mainly driven by higher spending on non-durable items and services. Government spending also rose, despite the previous government’s pledge to reduce it.
However, the per capita GDP continued to decline, decreasing by 0.5 percent in the June 2024 quarter. The last time GDP per capita increased was in the September 2022 quarter. On an annual basis, GDP per capita fell by 2.7 percent to the year ended June 2024.
New Zealand’s economy remains largely services-based, with primary produce accounting for only 7 percent of GDP, the production of goods making up 20 percent, and the remaining 73 percent being accounted for by various services. Forecasts by the Institute of Economic Research suggest little to no economic growth in the coming year.
Overall, while New Zealand narrowly avoided a technical recession, the country still faces challenges in stimulating economic growth. The decline in per capita GDP and the lack of growth forecasts indicate the need for targeted policies to support key sectors and encourage investment. The government will need to carefully manage interest rates and spending to promote economic recovery and stability.