New Zealand Economy – What went wrong in 2024?

The New Zealand economy is said to have taken a deep dive, falling into a recession in December 2024. With their growth projections falling apart in the last two quarters, economists and analysts were taken by surprise by the flow of events. With a revised growth projection shown in April -June at 1.1 percent, growth saw a sharp decline in July – September by 1.0 percent and is said to have gone further down by 0.2 percent by the last quarter.

What fueled the situation…

The currency did see a weaker performance against the US dollar which fell close to 2 percent, which took the traders by surprise. This has impacted the sentiments of various sectors in  New Zealand. The current downturn can be considered next to the crisis the nation faced way back in 1991, which did show a severe slowdown and the revival did take a long time. The recent election in the nation also saw some amount of unrest in the economy. The heated debates on how the taxpayer’s money needed to be used did throw the political scenario into the spotlight. The ruling party advocating for the need to protect the tax payer’s income showed resentment in the opposition.

This is said to be fueled by a sharp fall in the manufacturing sector in terms of their production level. Though this was the primary cause, the agriculture and services sector did see a better level of performance. With high inflation and borrowing costs, consumer confidence is said to have hit massively. It looks like the central bank introduced an “induced recession” for the economy to come back strong in 2025. Though the policies need to be worked upon to achieve the same, the policies formulated would be closely watched by nations across the globe. This is mostly going to put a lot of strain on the working population in terms of their job security going through next year. The trade unions in New Zealand have sparked a lot of debates in terms of how their jobs would be safe and their livelihoods would not be affected in the long term.

Brighter prospects in 2025… The only hope for the economy to get back up is rate cuts by the central bank. This would help sectors perform better and bring the economy back to its growth trajectory. We can only hope the same will be translated into a 50-75 basis point cut in their meeting due in February 2025.

Wishing you a Happy and Prosperous 2025!