GDP grew 0.8% in March quarter as slack in economy reduced
Thursday, 18 June 2026
Finance Minister Nicola Willis has welcomed the next stage in what she described as a “difficult” economic recovery, after Stats NZ confirmed stronger-than-expected GDP growth over the six months to the end of March.
“I expect next time we get a GDP update, it won’t be sunny as today,” she said, acknowledging the likely impact of higher fuel prices on activity in the current quarter.
But she said there was “every reason” to think the economy would bounce back from that setback.
“What I’m seeing is a real bounce back in confidence,” she said.
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Stats NZ reported the economy grew by a solid 0.8% in the three months to the end of March and that it also grew by 0.3% more than previously estimated during the final three months of last year.
It had previously reported economic growth in the three months to the end of December at 0.2%, but it has now upgraded that to 0.5% growth.
Economists had been expecting GDP growth in the March quarter to come in at between 0.7% and 1%, with ASB correctly forecasting the 0.8% result.
But the net effect of a series of revisions to past data is that the size of the economy at the end of the period was fractionally larger than the major banks or the Reserve Bank had forecast.
The economic update appears to support the Coalition Government’s contention that the economy entered the Middle East conflict on a healthier trajectory than in the past couple of years.
However, annual GDP growth — especially when adjusted for population growth — has remained relatively weak, after being pulled down by a 1.7% drop in the six months to the end of September 2024 and a 0.7% drop in the three months to the end of June last year.
GDP over the year to the end of March grew by a historically moderate 1.5%.
The recent growth may reflect a decline in spare capacity in the economy, assisted by accommodative monetary policy, rather than an increase in the potential output of the economy if it was firing on all cylinders.
“We’re seeing that many economies have struggled to reach the levels of growth that they have seen historically,” Willis acknowledged.
But Willis said the Government was taking measures to increase the potential capacity of the economy.
Government initiatives such as its Investment Boost policy to accelerate business investment, its signing of new international trade agreements and reforms to the Resource Management Act would help in that regard, she suggested.
The update came in the wake of a ceasefire agreement between Iran and the United States that has seen oil prices dip below US$80 a barrel and taken the edge off fears of a prolonged rise in global inflation and interest rates.
ANZ senior economist Matthew Galt said on Wednesday that the bank was less convinced than it had been that the Reserve Bank would raise the Official Cash Rate by 25 basis points from its current level of 2.25% when it meets next month, because of those developments.
The bank is still forecasting three interest-rate hikes this year, but said that would be more dependent on future data than before.
Galt indicated the bank would be unlikely to change that opinion based on the GDP figures announced this morning, saying they did not contain major surprises.
The Auckland Business Chamber reported a “sharp drop” in confidence among its members in its latest quarterly survey this morning, with the proportion of businesses it surveyed that rated their overall confidence negatively more than doubling to 54%.
However, Galt suggested any surveys conducted before the most recent developments in the Middle East might already be dated.