New Zealand flag New Zealand: Economic outline

Economic Outline

Economic Indicators

Thanks to exemplary pandemic management, New Zealand rebounded quicker than many other advanced economies. This resilience bolstered economic activity, complemented by robust investment and consumption, facilitated by generous fiscal and monetary support. However, after considerable policy tightening, the economy slipped into a technical recession, witnessing a 0.1% quarter-on-quarter (seasonally adjusted) decline in real GDP in 2023Q1, following a 0.7% drop in GDP in 2022Q4. For the year as a whole, the IMF estimated growth at 1.1% due to deteriorating terms of trade, elevated debt servicing costs, and subdued consumer sentiment amid declining house prices and a soft labor market. Growth is expected to stay restrained in 2024 (1%) as the impact of monetary tightening unfolds fully, before accelerating to 2.1% in 2025 (IMF).

In May 2023, the government disclosed its revised plan to attain a fiscal surplus by the fiscal year ending June 2026 (FY26), postponing it by a year from the initial schedule. This adjustment was prompted by a less optimistic economic growth and tax revenue outlook, alongside 0.7% of GDP attributed to fiscal costs related to recent floods. Additionally, the government allocated an additional cumulative 1.5% of GDP for the implementation of a new National Resilience Plan. The government deficit was estimated at 5.4% of GDP in 2023 by the IMF; it should remain at the same level this year and decrease to 3.4% by 2025. The debt-to-GDP ratio, at 46.1% last year, is expected to follow an upward trend, reaching 49.9% in 2024 and 52.3% in 2025, as per the IMF. Consumer price inflation began to ease in Q2/2023, averaging an estimated 4.9% over the year. It should return within the Reserve Bank of New Zealand’s 1–3% target range in 2024 (at 2.7%, IMF). Economic challenges include dependence on foreign investment, high household and corporate debt, reliance on Chinese demand, insufficient skilled workers, low R&D, and a shortage of housing. The economy is also vulnerable to international commodity prices, particularly dairy and meat. Strong public funds have been allocated to the reconstruction of roads, railways, and the KiwiBuild Programme.

Labor market conditions remain tight, characterized by record high labor force participation and negligible slack, evidenced by historically low levels of unemployment and underemployment rates. This scenario has led to upward pressure on wages, especially within the services and construction sectors. While the recent surge in migration has alleviated some labor market strain, expectations for wage growth, particularly in the short term, remain elevated. Unemployment was estimated at 3.8% in 2023, from 3.3% one year earlier. It is forecast to increase to 4.9% this year (IMF). Some key social issues faced by the New Zealand government include dealing with an ageing population and increasing health care costs, boosting employment and household incomes, and increasing housing affordability.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 242.35249.04257.63266.77277.69
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 47,28447,53748,53149,64551,049
General Government Balance (in % of GDP) -5.1-4.9-4.2-2.8-1.9
General Government Gross Debt (in % of GDP) 47.245.947.448.748.8
Inflation Rate (%)
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) -21.27-17.08-15.53-14.27-13.31
Current Account (in % of GDP) -8.8-6.9-6.0-5.4-4.8

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

Monetary Indicators 20162017201820192020
New Zealand Dollar (NZD) - Average Annual Exchange Rate For 1 GBP 1.941.811.931.881.98

Source: World Bank, 2015


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Latest Update: May 2024