‘On the edge of a recession’: As the GDP shrinks, Willis blames ‘international turmoil’ and Labour blames National

Thursday, 18 September 2025

New Zealand’s economy has shrunk by 0.9%, a blow that Finance Minister Nicola Willis says was the result of a grim national psyche following US President Donald Trump’s tariffs.

Willis said she was certain things would get better, soon, but she described the latest GDP results - for the months April, May and June - as evidence New Zealand “suddenly had the stuffing knocked out of it”.

New Zealand’s GDP result was a stark contrast to our closest neighbour, Australia, which recorded growth of 0.6%.

Willis blamed New Zealand’s negative growth on Trump, and the vibes of New Zealand consumers and companies. She blamed “international turmoil and uncertainty” for ruining New Zealand’s business confidence.

“There was a very big impact to the New Zealand psyche when the US tariffs were announced,” she said.

“That tariff announcement had an outsized impact on New Zealand sentiment. It appears to me that Australian firms and households retained high levels of confidence through that period.”

The Labour Party said the GDP results were proof the Government’s economic strategy had failed. The party’s deputy, Carmel Sepuloni, said Willis needed to stop blaming the previous Labour Government, and Trump, for the economic downturn. She said Willis should be “ashamed” of her record as economic growth minister.

“This is outrageous, she cannot continue to blame others. Where to next? Is it the fault of the butcher, the baker, the candlestick maker, but not Nicola Willis? It is her responsibility. She is the minister of finance,” Sepuloni said.

Former finance minister and ACT Party founder Roger Douglas joined the criticism, saying Willis should resign over what he said was a failure to tackle “ballooning fiscal deficits and public debt”.

But Willis said her plan was working, and she had spoken to Prime Minister Christopher Luxon - who still had confidence in the plan.

“Yes, the prime minister has confidence in me. We are doing the right things,” she said. “It’s true, Trump disrupted my momentum.”

She said these results, for the second quarter, didn’t reflect current sentiment.

“Now there’s some evidence of a bounce back. In July, there was a 7.8% increase on exports to the US,” she said. “We are now nearing the end of the third quarter and there are signs the economy is growing again.”

Acting Prime Minister David Seymour agreed there would be a recovery in the next quarter.

“If you look at the live GDP forecast, it’s actually at 0.7 for the quarter to date. That is a much more positive picture,” he said.

But Labour’s finance spokesperson, Barbara Edmonds, said the country was “now on the edge of a recession” after Thursday’s result.

A recession would be declared after two consecutive quarters of negative growth.

The Stats NZ results, confirming a 0.9% decline, had been worse than had been predicted. Major banks expected a decline of around 0.4%.

And the Reserve Bank had also predicted decline. In its August Monetary Policy Statement, it said “economic indicators suggest the economy contracted in the June quarter”.

The 0.9% decrease in GDP, a measure of economic activity, followed a 0.9% increase in the three months to March. One of the worst-hit industries was manufacturing, down 3.5% in the June quarter.

“The 0.9% fall in economic activity in the June 2025 quarter was broad-based with falls in 10 out of 16 industries,” Stats NZ economic growth spokesperson Jason Attewell said on Thursday.

“GDP has now fallen in three of the last five quarters.”

GDP increases forecast in the next year

Stats NZ’s update on Thursday showed GDP fell 1.1% in the 12 months to June, however, the central bank has said “we expect GDP growth to increase over the coming year”.

When comparing the March quarter to the latest June quarter, the worst-hit industry was mining, down 4.1%, followed by manufacturing, down 3.5%, goods-producing down 2.3%, and construction, down 1.8%.

The 3.5% decline in manufacturing was led by a drop in transport equipment and machinery producing, while the fall in goods-producing was attributed to decreased export volumes associated with the manufacturing of food, beverage and tobacco.

Exports were down 1.2% with falls in dairy, meat and other food and beverage exports. Primary industries saw a decline of 0.7%.

The construction industry’s 1.8% decline followed a 1.2% increase in the March quarter. The latest fall has been blamed on less demand for residential building construction.

“Construction activity fell across a range of measures in the June 2025 quarter, not just GDP,” Attewell said.

“The value of building work put in place, a key input to GDP, fell 2.2%, and filled jobs in the construction industry fell 1.3%.”

But not all industries went backwards. The largest upward contributor to GDP was rental, hiring and real estate services, up 0.7% over the quarter.

Electricity, gas, water and waste services were up 0.4% in the June quarter. Information media and telecommunication services - including internet service providers - also saw a 1.8% increase in activity.

Parts of the public service sector also recorded a boost, with public administration and safety, and defence, up 0.5%.

International comparisons for the quarter

New Zealand’s June quarter GDP was worse than comparable countries. However, the Reserve Bank has noted that “household spending is growing but at a subdued pace”.

Stats NZ’s update showed household consumption expenditure increased 0.4% over the June quarter, with a rise in spending on items such as televisions, computers and telecommunications equipment.

Here’s how the GDPs of other countries were faring:

NZ -0.9%

Australia 0.6%

Canada -0.4%

China 1.1%

Japan 0.5%

United Kingdom 0.3%

United States 0.8%

How are you feeling about the state of the economy? Let us know in the comments.