New Zealand’s economy has slipped into recession, with GDP falling 1.0% in Q3. Official data showed Thursday that New Zealand tipped into recession in the third quarter. The economy suffered an unexpectedly sharp slump that sent the country’s currency tumbling and sparked political finger-pointing.
The conservative coalition government defended its “respect for taxpayers’ money” as the opposition accused it of feeding a “recessionary fire.” For months, the economy has teetered on the brink of recession, being held back by high prices, heightened borrowing costs, and a housing crisis.
But the latest figures showed gross domestic product fell a bigger-than-expected 1.0 percent July-September from the previous three months. Analysts had forecast a contraction of 0.2 percent. That marked the second quarterly contraction after shrinking a revised 1.1 percent in April-June.
“Yes, the one percent decline in activity is huge. And it’s much weaker than anyone had anticipated,” said a report by Kiwibank Economics.
It said that excluding an economic decline during the COVID-19 pandemic, the New Zealand economy had posted its weakest six-month period since 1991. The report said that weakness is spreading across most industries. However, Kiwibank said a statistical revision of growth earlier in the year partly balanced out the recent drop.
It said the latest quarter may be the last in the cycle of decline, and a one percent cut in interest rates over the quarter is likely to provide relief going forward.
At one point in the late afternoon, the New Zealand dollar was trading at US$0.5626—off about 1.8 percent from the previous day—as the scope of the slump caught traders by surprise.
“The latest economic figures highlight the importance of the steps the government has taken to restore respect for taxpayers money and drive economic growth,” the government said in a statement.
