Sun Sep 15 17:00:00 UTC 2024: ## New Zealand Economy Faces “Rolling Maul Recession” as GDP Expected to Contract
**Wellington, New Zealand** – Economists predict that New Zealand’s economy will contract in the second quarter of 2023, continuing a trend of weak growth that has persisted for two years. The contraction, attributed largely to the impact of high interest rates on consumer spending, is not expected to meet the technical definition of a recession, but it is nonetheless a concerning development.
“The overall picture remains soft,” stated Westpac senior economist Michael Gordon, predicting a 0.4% decline in GDP for the June quarter. This follows a meager 0.2% rise in the previous quarter, leading to what Gordon describes as a “rolling maul recession.”
Kiwibank economists echoed this sentiment, forecasting a similar 0.4% drop and suggesting the country is headed for a “triple-dip recession.” They highlight that while technically a recession requires two consecutive quarters of negative growth, the reality for households and businesses has been two years of consistent economic hardship.
Despite the bleak outlook, the Reserve Bank (RBNZ) has signaled a shift in policy, initiating cuts to the Official Cash Rate (OCR) earlier than initially projected. This shift is driven by a recognition of the economic downturn and a desire to stimulate growth.
However, the RBNZ will continue to monitor inflation data closely, ultimately determining the pace and extent of future interest rate cuts. While the second quarter GDP data is expected to paint a picture of continued economic weakness, it is unlikely to significantly influence the RBNZ’s current trajectory.
Several economists, including ANZ’s Henry Russell, emphasize that the focus has shifted to the economy’s responsiveness to lower interest rates. They highlight that the upcoming data will provide valuable insight into the impact of past monetary tightening on real-world economic activity.
Looking forward, ASB economist Kim Mindy notes that early indicators suggest a potential improvement in some sectors of the economy in the third quarter. While forecasting a further two OCR cuts this year, she acknowledges that a stronger-than-expected GDP contraction could lead to a slight unwinding of market pricing for future rate cuts.
The upcoming GDP release on Thursday is anticipated to be closely watched by economists and policymakers alike, offering a crucial snapshot of the New Zealand economy’s current state and providing insights into the path ahead.
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