New Zealand's economy officially entered a recession in the third quarter of this year, with gross domestic product (GDP) shrinking by 1.0 percent between July and September, according to data released.
This marked the second consecutive quarterly contraction, following a revised 1.1 percent decline in the April-June period. The slump was sharper than analysts' forecast of a 0.2 percent contraction, triggering significant market reactions and political debate.
New Zealand's Weakest economic performance in decades A report by Kiwibank economics highlighted that, excluding the Covid-19 pandemic, the recent six-month downturn was the country's worst economic performance since 1991. The report noted that the downturn has impacted a wide range of industries, reflecting the broader economic challenges. "Yes, the one percent decline in activity is huge. And it's much weaker than anyone had anticipated," the Kiwibank report stated.
The bank suggested that the decline might be offset by an upward revision of earlier growth figures and anticipated relief from a one percent interest rate cut introduced in the quarter. New Zealand Dollar hits new lows The New Zealand dollar saw a sharp decline, trading at US$0.5626 in the late afternoon, down 1.8 percent from the previous day. The unexpected scale of the contraction caught traders off guard, further dampening market sentiment. The government defended its economic policies amid the downturn, emphasizing measures aimed at economic growth and fiscal responsibility.
"The latest economic figures highlight the importance of the steps the government has taken to restore respect for taxpayers' money and drive economic growth," the government said in a statement. Finance Minister Nicola Willis attributed the contraction to the effects of high inflation and the Reserve Bank's policy to induce a recession to control inflation. "The decline reflects the impact of high inflation on the economy. That led the Reserve Bank to engineer a recession which has stifled growth," Willis said.
She remained optimistic about future growth, predicting economic recovery in the next quarter and stronger growth in 2025. The opposition Labour Party criticized the government’s approach, blaming Finance Minister Willis for exacerbating the recession. "Nicola Willis' cuts and austerity have fed the recessionary fire," said Barbara Edmonds, Labour’s finance spokesperson.
