‘Crawling out of recession’: Everything you need to know about NZ’s economy

Thursday, 20 March 2025

Despite slight improvement, New Zealand’s economy was still struggling at the end of last year.

Stats NZ released its Gross Domestic Product figures for the December 2024 quarter on Thursday. Here’s a run down on everything you need to know.

What is the GDP?

Gross domestic product (GDP) is the monetary value of goods and services in a country and is used to gauge a country’s economic performance.

The data, which is measured per quarter, helps groups such as policy makers manage the economy.

What happened?

New Zealand’s GDP rose 0.7% in the December 2024 quarter. After eight consecutive quarters of decline, New Zealand’s GDP per capita increased by 0.4%.

Eleven of the 16 industries increased this quarter with the largest increases in rental, hiring and real estate services; retail trade and accommodation; and healthcare and social assistance.

“Higher spending by international visitors led to increased activity in tourism-related industries such as accommodation, restaurants and bars, transport and vehicle hiring,” Stats NZ economic growth spokesperson Katrina Dewbery said.

The largest falls were in construction, which fell 3.1% and information media and telecommunications which dropped 3%.

What does this mean for our economy?

Basically, the recession the country was in, is now over.

But even though GDP grew in the December quarter the economy was still 1.1% smaller than in December 2023.

New Zealand Council of Trade Unions economist Craig Renney said the economy was still far from being on track.

“Our economic challenges are still very much here and worse than they were a year ago.”

Kiwibank chief economist Jarrod Kerr said New Zealand was “crawling out of recession” and acknowledged the data showed “this as the first step in the economy's recovery”.

“Still it must be noted that there were still pockets of significant weakness.

“Construction alone took away 0.2% points of growth over the quarter having posted a sizeable, but not unexpected, 3.1% decline in activity. Meanwhile across the professional landscape, everything from business services to public admin and media continues to suffer under the weight of a still deteriorating labour market.”

But the 0.7% rise was still higher than what economists were expecting with many predicting a 0.3 to 0.5% increase.

Westpac economist Michael Gordon said seasonal issues were “overstating the strength of the rebound”, but there was genuine growth in there as well.

“The December quarter result was ahead of our forecast of 0.5%, which in turn was at the higher end of the range of market forecasts. We’d call this a genuine upside surprise, in the sense that the growth was driven more by real activity and less by the seasonal issues.

“Sector-by-sector growth added up to around 0.3%, with better-than-expected contributions from a range of service sectors including healthcare, professional services, and art and recreation.”

What were the ‘seasonal issues’ experts were cautious about?

Stats NZ has recently introduced a new method for seasonally adjusting the data post-Covid.

Seasonal adjustment is the process of estimating and removing the impact of things like sales increases at Christmas or annual cycles in dairy production. When the pandemic began in 2020 the shocks to some data, including GDP, required that treatments were applied to the seasonal adjustment process.

As activity returned to more stable patterns, some settings chosen during the pandemic were no longer optimal. These settings were updated for the GDP September 2024 quarter.

What does today’s data mean for future cuts to the Official Cash Rate?

Gordon said it was likely the Rerserve Bank (RBNZ) would continue with about two more cuts to the Official Cash Rate (OCR) this year.

The next OCR review is on April 9.

ASB economist Wesley Tanuvasa said the GDP data would not change much for the Reserve Bank’s outlook.

“Beyond 25 basis point cuts in April and May, the increasing skew of downside risks to the medium-term inflation outlook could see the RBNZ continue with OCR cuts.

“All up, the recent growth drivers look fragile, but the global scene is highly dynamic, and developments are rapidly changing. The best place right now is an OCR within the 2.5%-3.5% neutral range.”

Meanwhile, Kerr said he was “optimistic” about the economy in 2026, but growing downside risks to the global outlook could pose a potential headwind for the Kiwi economy's recovery.

“And should the downside risks persist, then a move to a cash rate below 3% may be needed to get us back on track. For now though, today's report changes little to our outlook. We continue to expect the Reserve Bank to deliver two 25bps [basis points] cut over their next two meetings. Followed by at least one more 25bps cut to 3% in the third quarter of this year.”