New Zealand has officially entered a recession, with data released Thursday revealing a larger-than-expected 1.0% contraction in GDP for the third quarter of 2024.
The economy had already shrunk by a revised 1.1% in the previous quarter, marking two consecutive declines and meeting the technical definition of a recession
The downturn exceeded analysts’ expectations of a 0.2% contraction and triggered a 1.8% fall in the New Zealand dollar, trading at US$0.5626 by late afternoon. Kiwibank economists described the slump as “huge,” noting it was the weakest six-month period since 1991 outside of the Covid-19 pandemic.
High inflation, elevated borrowing costs, and a housing crisis have weighed heavily on consumer sentiment. The conservative coalition government defended its fiscal policies, emphasising a “respect for taxpayers’ money” and predicting recovery in the next quarter.
Finance Minister Nicola Willis attributed the recession to high inflation and the Reserve Bank’s measures to cool the economy. However, opposition Labour finance spokesperson Barbara Edmonds criticised the government’s austerity policies, accusing it of fuelling the economic downturn.
Despite the bleak figures, Kiwibank suggested the recent cycle of decline may be nearing its end, citing a 1% cut in interest rates as a potential relief for future growth.