New Zealand’s economy appears to have made a modest recovery from a brief recession in the second quarter, driven largely by a significant rise in immigration. According to a median estimate from a Bloomberg survey of economists, the Gross Domestic Product (GDP) saw an increase of 0.4% in the three months leading up to June.
Compared to the previous year, the economy grew by 1.2%. These findings will be officially published by Statistics New Zealand on Thursday at 10:45 a.m. in Wellington.
The country experienced economic contractions in the final quarter of 2022 and the initial three months of 2023. This hint of growth will likely be a positive note for Prime Minister Chris Hipkins, especially with the upcoming elections in less than a month, where he currently trails in the opinion polls.
However, some experts predict that New Zealand might face another recession by the year’s end, given the high interest rates and declining export prices, particularly for dairy products.
Jarrod Kerr, the chief economist at Kiwibank in Auckland, commented on the situation, “With aggressive policy tightening and a weakening global scenario, particularly as China’s post-Covid recovery slows, our primary expectation is for New Zealand to enter another recession later this year.”
The Statistics New Zealand agency is currently reassessing its seasonal adjustment of the GDP series, which might lead to a revision of the first-quarter decline of 0.1%. This review also introduces unpredictability in the quarterly growth figures.
In August, the Reserve Bank had projected that the economy would grow in the second quarter but might contract in the subsequent two quarters. In contrast, the Treasury Department recently predicted continuous growth into the next year.
Economic growth in the second quarter was supported by recovery efforts post Cyclone Gabrielle and other severe weather incidents that affected the North Island earlier in the year. Additionally, there was a surge in the services sector, including real estate.
However, the residential construction sector saw a decline, and manufacturing remained stagnant. Retail sales volumes also decreased, as high borrowing costs impacted household expenditure.
The surge in immigration has been a significant factor in the economic boost. New Zealand witnessed a record net addition of 92,600 individuals in the year leading up to June, leading to increased demand for rental properties and housing.
The Treasury cited this heightened demand as a reason to remain optimistic about avoiding another recession.
Despite these figures, New Zealand’s population growth of an estimated 0.6% in the second quarter surpassed the median GDP expectations, indicating that per capita growth might have decelerated for the third consecutive quarter.
Miles Workman, a senior economist at ANZ Bank New Zealand in Wellington, noted, “The increasing gap between the headline and per capita growth demonstrates that New Zealand is relying on population growth to enhance the headline GDP, reminiscent of pre-pandemic trends.”
