New Zealand's economy rebounded more strongly than expected, demonstrating a 0.7% growth in gross domestic product (GDP) for the fourth quarter of 2024, which effectively pulls the country out of a technical recession. This growth marks a significant turnaround following a 1.1% contraction in the previous quarter, signifying ample cause for optimism amid lingering global uncertainty.
The data, released by Statistics New Zealand on March 20, 2025, showed that the economic improvement surpassed analysts' expectations of a mere 0.4% increase and the central bank's forecast of 0.3%. Despite the encouraging quarter, annual GDP decreased by 1.1%, reflecting persistent economic challenges, yet this was better than the anticipated fall of 1.4%.
According to Statistics New Zealand, eleven out of sixteen industries saw growth in the December quarter. The standout performers were in the rental, hiring, and real estate sectors, along with retail trade and healthcare services. Katrina Dewbery, spokesperson for Statistics New Zealand, noted, "Higher spending by international visitors led to increased activity in tourism related industries such as accommodation, restaurants and bars, transport and vehicle hiring.” This surge in tourism-related sectors reflects a recovery that has been much-needed after a challenging year.
Finance Minister Nicola Willis welcomed the confirmation of economic growth. "We still have a way to go to get where we want to be, but with economic forecasters predicting further growth in the quarters ahead, things are looking up,” she expressed. The government and policymakers look upon these figures as evidence of the beginning of a healthier economic climate.
However, not all is smooth sailing. Despite these positive reports, significant weakness continues to plague certain sectors, particularly construction. This decline, compounded by a 3% fall in building activity and challenges in telecommunications, has raised concerns among economic analysts and politicians alike.
David Seymour, acting Prime Minister while his colleagues were overseas, described the slight growth as a "sunny tail-end of summer" and expressed his hope for further growth. "There is still a lot of economic pain but a recovery underway, and just as the sun is shining today, that's got to be good for New Zealanders' future,” he commented. He encouraged continued governmental fiscal discipline to sustain this recovery.
Conversely, opposition leader Chris Hipkins emphasized that the resurgence should not be heralded as a complete success, calling attention to the ongoing struggles faced by New Zealanders. "People who have lost their jobs are still suffering because of it. Building and construction is probably one of the greatest examples of that,” Hipkins stated, underscoring the divergent realities citizens face amidst this economic pivot.
After experiencing one of the worst contractions in nearly three decades—other than during the pandemic—experts remain cautiously optimistic regarding the economy's trajectory. Jarrod Kerr, chief economist at Kiwibank, cautioned that while growth is a welcome sign, "We're still quite weak when you scratch beneath the surface, we are very much crawling out of recession, but I think we'll pick ourselves up and we are optimistic about the outlook.” His insights reflect a sentiment shared among economists as they anticipate that sectors such as retail and hospitality will begin to show gradual improvements.
The Reserve Bank of New Zealand has also cut the official cash rate by 175 basis points since August and is projected to continue lowering rates, which could spark increased household spending and business investment. ANZ economists have forecast three additional cuts to bring the rate down to 3% by mid-year. The monetary policy adjustment represents a strategic response to stabilize growth amid external pressures from global economic conditions.
The landscape is complicated further by global uncertainties, including the potential ramifications of U.S. President Donald Trump’s tariffs on major trading partners. Economic analysts express concerns that such international policies could stymie New Zealand's export potential as it relies heavily on trade, especially with economies like China and the United States.
Despite these hurdles, the quarterly growth rate of New Zealand stands out among its major trading partners, showcasing resilience amid adverse conditions. ASB senior economist Mark Smith described the newfound growth as a "sight for sore eyes" but urged caution: "We do think the broader global headwinds provide a sizeable dampening over 2025 – we are not so convinced the fourth quarter breadwinners of growth can maintain their pace over the year.”
With these mixed indicators, the road ahead remains fraught with challenges, but as New Zealand navigates its economic recovery, stakeholders emphasize the importance of strategic measures to reinforce growth. Policymakers and economists alike will be keenly watching developments as the year unfolds, underscoring the critical need for decisive action and continued resilience from both the government and the population.
