New Zealand Enters Recession With Sudden Economic Slowdown

New Zealand officially entered a recession in the third quarter of 2024, with official data released on Thursday revealing an unexpectedly steep economic downturn. The contraction sent the New Zealand dollar tumbling and ignited a political blame game between the ruling coalition and the opposition.

The country’s gross domestic product (GDP) shrank by a larger-than-anticipated 1.0 per cent from July to September, following a revised 1.1 per cent contraction in the previous quarter. Analysts had forecast a milder decline of 0.2 per cent. This marks the second consecutive quarterly contraction, meeting the technical definition of a recession.

Kiwibank economists described the 1.0 per cent decline as “huge” and “much weaker than anyone had anticipated.” Their report noted that, excluding the Covid-19 pandemic, New Zealand’s economy had experienced its weakest six-month period since 1991, with widespread declines across various industries.

The report, however, highlighted a statistical revision that upgraded growth figures earlier in the year, offering a slight offset to the recent downturn. It also suggested the third quarter may represent the nadir of the economic cycle, with a one per cent reduction in interest rates expected to ease conditions soon.

The New Zealand dollar fell sharply, trading at USD0.5626 in the late afternoon—a 1.8 per cent drop from the previous day—as traders reacted to the scale of the economic slump.

Amid mounting criticism, the conservative coalition government defended its fiscal policies. “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 stated.

Finance Minister Nicola Willis acknowledged the depth of the economic contraction, stating, “The decline reflects the impact of high inflation on the economy. That led the Reserve Bank to engineer a recession which has stifled growth.” She projected an economic recovery in the next quarter, with stronger growth anticipated in 2025.

The opposition Labour Party, however, laid the blame squarely on the government’s policies. Labour finance spokesperson Barbara Edmonds accused Willis of exacerbating the downturn, stating, “Nicola Willis’ cuts and austerity has fed the recessionary fire. There's no creative accounting that Nicola can do to make these GDP figures better.”

New Zealand’s economy has been under pressure for months, with elevated borrowing costs, persistent inflation, and a housing crisis weighing heavily on consumer sentiment. The latest figures have deepened concerns, further highlighting the economic challenges faced by the nation.

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