GDP letdown: Sooo… about that economic recovery

Thursday, 19 March 2026

What do you think? Have your say in the comments.

OPINION: Well that wasn’t great. Heading into what will now be extremely stiff economic headwinds, the growth rate was an anaemic 0.2%.

That is a disappointing result for the Government. Basically the economy, per-person, stood still. Real net national disposable income, which measures New Zealanders’ purchasing power in the world, also stood still.

While there may be revisions down the line, it appears there has been basically no real per capita income growth since 2021. In other words, the living standards of New Zealanders have not improved since just before the second major Covid-19 lockdown.

That’s despite the border reopening and everything else that has happened in the meantime.

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That is a long time. And it is now clearly locked in as one of the driving factors behind the grumpiness of the electorate, the annoyance about the cost of living and everything else.

Things do not feel like they have been getting better for New Zealand because they have not. A fair bit of last year’s poor growth can be sheeted home to Donald Trump’s Liberation Day tariffs and the effect that had on scuttling confidence. But things were pretty settled on that front by the end of last year.

This data is for the three months leading into the end of last year. Stats NZ also trimmed back its growth estimate for the previous quarter.

The upshot is that New Zealand grew a meagre 1.3% in 2025.

This will simply add more pressure to the Government’s narrative that it is getting the economy sorted out. The numbers were at the lower end of market expectations.

The original political mistake of the Luxon-led Government was giving the impression that it would all be sorted - and quickly. But these things are hard and that has clearly not occurred.

When the next GDP figures come in towards the middle of the year they will be for January to March. Given that Donald Trump began bombing Iran at the end of February they also may be not much improved - unless January and February were months with masses of activity and were much better.

Construction was down 1.4% for the quarter and 6.2% for 2025, goods-producing industries were down 2.9% for the year.

Retail and trade were the stand-out sector for 2025, growing at 2.2% for the year.

That’s the best sector and it is below the average growth rate for almost the past 40 years.

By the time of the next GDP figures, New Zealand will likely be in the middle of an oil price and fuel price spike that is well and truly sloshing its way through the economy, giving the Government more cover for average growth.

This is bad news that is now likely to be compounded by much more bad news and price rises over the coming months.

It feels like just about everyone has been hanging out and egging on green shoots in the economy since 2024.

Obviously the picture is never even and there are plenty of firms doing well in New Zealand and industries that are growing. But overall, the picture is one of not much growth.

The growth rate was half that of Australia in 2025 - although the Aussies are also now dealing with a Government spending-fuelled inflation problem which will be accounting for some of that.

It is the same growth rate as the UK, where the Starmer Government, and its prime minister Sir Keir, are struggling politically.

Given present international circumstances, the long-promised, vaunted economic recovery on these shores now looks further away than ever.