New Zealand’s economy has been revealed for the first quarter, and confirmed a recession began in the last three months of 2022, sending the local currency lower.
The gross domestic product (GDP) fell 0.1% in the fourth quarter, and then dropped a revised 0.7%. Economists were expecting a 0.1% decline. Compared with a year prior, the economy grew 2.2%, lower than the forecast of 2.6%.
The central bank hiked interest rates after trying to regain control of the inflation, with the first-quarter activity hampered by a damaging cyclone in February.
The recession confirmation comes four months prior to a general election on October 14th, which is expected to feature cost-of-living pressures and the economic downturn.
The New Zealand dollar fell after the release of the GDP, buying 61.94 US cents (approximately 90 cents AUD) compared to 62.18 US cents (approximately 91 cents AUD) previously.
The Reserve Bank had predicted a growth of 0.3% for the first quarter, and small contractions in the second and thirds quarters.
In a May budget from the Treasury Department, a forecast was withdrawn for three straight quarter of contraction, believing tourist arrivals, cyclone recovery work and government spending would grow support.
Jarrod Kerr, Chief Economist at Kiwibank in Auckland said, “Our economy is smaller than forecast by the RBNZ and Treasury. And the brunt of the slowdown is yet to come. We’re forecasting further contractions over the year ahead.”
Unemployment remains at a record low of 3.4%, tourism is recovering rapidly and immigration is surging.
It was reported the business services was the largest downward driver in the GDP for the first quarter, falling 3.5%.
It is important to note: most of New Zealand’s technology companies are run by Australia and people in Australia.
Adverse weather events during this quarter were said to have contributed to falls in horticulture and transport support services, and disrupted education services.
Household consumption expenditure rose 2.4%, led by high international travel spending. Overall, household spent less on goods, more specifically grocery food.
