New Zealand GDP drops by 0.2 per cent

·2-min read

New Zealand's economy contracted marginally in the first quarter of the year, with GDP falling by 0.2 per cent, raising fears of a second COVID-era recession.

The result is below banking industry expectations of a flat result and well below the Reserve Bank's forecast of an 0.7 per cent rise.

It also confirms New Zealand's rollercoaster economic response to COVID-19, with GDP dropping in five of the last nine quarters.

The latest figures correlate with the arrival of Omicron in New Zealand, which produced widespread staff shortages and supply chain disruptions as many Kiwis caught COVID-19.

Stats NZ said primary industries drove the dip, falling 1.2 per cent.

"We saw lower output in the food, beverage, and tobacco manufacturing sub-industry; and the agriculture, forestry, and fishing industry," Stats NZ spokeswoman Ruvani Ratnayake said.

"These declines corresponded to falls in related exports categories, including dairy products; meat products; agriculture and fishing products; and other food, beverage and tobacco products."

Finance Minister Grant Robertson said the figures reflected a "volatile global situation", pointing to the more favourable annual growth rate of 5.1 per cent.

"The domestic economy is resilient and the annual GDP figure is strong," Mr Robertson said.

"Unemployment is at a record low and we are in a strong fiscal position. The easing of border restrictions and opening up to skilled workers and tourists will help business and the economy rebuild."

New Zealand's 0.2 per cent fall compares with Australia's 0.8 per cent rise over Q1.

Aotearoa's economic output this decade has mirrored its topsy-turvy COVID-19 experience.

A 1.2 per cent Q1 2020 drop preceeded a vicious 10.3 per cent fall in Q2, inking a recession from New Zealand's harsh national lockdowns.

The economy roared back in Q3 2020, rising by 13.7 per cent.

A Delta outbreak saw GDP slump in Q3 2021 by 3.6 per cent, followed by a Q4 bounce of 3.0 per cent.

A second successive fall would mean New Zealand suffers a second recession of the pandemic.

This time around, the economic headwinds are blowing from new directions: Russia's invasion of Ukraine, supply chain challenges, and reduced domestic spending.

The figure may convince NZ's Reserve Bank to put the brakes on its quest to slow the Kiwi economy, which is suffering from runaway inflation.

New Zealand's central bank has lifted the official cash rate at its last five meetings from an emergency setting of 0.25 per cent to 2.0 per cent.

CPI inflation is currently running at 6.9 per cent in New Zealand, a 32-year high, but below the OECD average.

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