New Zealand’s economy has made a significant recovery, with its gross domestic product (GDP) increasing by 0.7% in the December 2024 quarter, marking a notable exit from recession. This uptick comes in stark contrast to the previous two quarters, which saw contractions of 1.1% each, effectively indicating that New Zealand is beginning to stabilize after a challenging economic period.
The figures released on Thursday by Stats NZ revealed that 11 out of 16 industries reported growth, driven largely by the rental, hiring, and real estate services sectors, along with improvements in retail trade and accommodation. Notably, both the healthcare and social assistance industries also saw positive developments during this quarter.
Katrina Dewbery, an economic growth spokesperson for Stats NZ, commented on the influence of increased spending by international visitors, which has had a particularly buoyant effect on tourism-related sectors. Services such as accommodation, restaurants, bars, and transport witnessed heightened activity due to this trend, contributing to the upward trajectory in the GDP.
However, not all sectors are experiencing this positive momentum. The construction industry, which is pivotal for the economy, suffered a decline of 3.1% during the December quarter, reflecting a downward trend that has persisted since early 2024. The information media and telecommunications sectors also faced challenges, posting declines amid continued reductions in services.
Finance Minister Nicola Willis expressed optimism regarding the GDP figures, highlighting that a growing economy heralds “more opportunities, more jobs, higher incomes and, ultimately, better health, education and other public services.” Notably, the GDP per capita also rose by 0.4% during this quarter, representing the first increase measured in two years.
The increase in exports, by 3.5%, is another encouraging sign, bolstered in part by the resurgence in spending from international tourists. Willis indicated that while there is a long way to go, the forecasts for continuing economic growth are promising.
Conversely, opposition voices from the Labour Party caution against viewing the growth as a panacea. Finance spokesperson Barbara Edmonds emphasized that many New Zealanders are still not feeling the effects of this “very slight growth,” especially with the construction sector's ongoing struggles. “The direct result of National’s cuts to infrastructure and housing projects,” Edmonds noted, articulating concerns about the socioeconomic implications of these cuts on jobs and housing availability.
Looking back, the economy had previously met the definition of a recession, with two consecutive quarters of negative growth, a situation that has not been experienced since the economic downturn of 1991 outside of the pandemic period. The comparison is significant, spotlighting the fragility of the economic recovery as New Zealand seeks to regain its footing.
A Reuters poll had forecast the GDP would edge up by 0.4%, reinforcing the notion that while growth is returning, the broader economic landscape remains complex and requires careful monitoring.
Despite the optimism, challenges such as a dip in job ads — which fell 2% month-on-month in February — and global economic uncertainties posed by potential tariffs from the U.S. must not be overlooked. As noted by Kiwibank, while there are signs of improvement in export prices for key commodities like dairy and meat, unpredictability and confusion persist in global markets.
In summary, while New Zealand's GDP figures for the December quarter point towards a resurgence in economic activity, a crucial focus remains on sustaining this momentum in the face of ongoing challenges, particularly within the construction sector. As the year unfolds, stakeholders in the nation are eagerly anticipating whether this upward trend will solidify into consistent growth, bolstering confidence across all sectors.
