Real GDP growth

IBISWorld forecasts real GDP to rise by 0.5% in 2024-25, to $284.7 billion. The Treasury (Te Tai Ohanga) and New Zealand's Monetary Policy Committee expect inflation to fall within the 1-3% target in late-2024. This expected reduction in inflation will support real GDP growth. Moreover, the Budget 2024's tax relief package is anticipated to stimulate household income and spending, contributing to real GDP and overall economic growth. Still, the prevailing high interest rate environment and inflationary pressures in the first half of 2024-25 could challenge the nation's economy. These factors are expected to constrain inflation-adjusted spending, limiting real GDP growth during the period.

New Zealand's GDP has increased over the past five years. A low cash rate environment until early 2022 placed downward pressure on the general level of interest payments in New Zealand. These factors have led to more significant household consumption expenditure, which, coupled with greater government expenditure, have aided economic growth over the past five years. However, annual inflation reached 7.2% over 2022, driving the RBNZ to raise the Official Cash Rate (OCR) several times over 2022-23. The Reserve Bank of New Zealand's (Te Putea Matua) efforts to control inflation by raising the OCR have curbed further increases in real GDP over the period.

Exports have risen over the period, thanks to strong overseas demand for New Zealand produce, such as dairy products and wine. The duty-free access of most New Zealand dairy products to China since 1 January 2022, alongside the New Zealand-China Free Trade Agreement (FTA) upgrade in January 2024, has contributed to export growth over the past few years. Expanding exports have further boosted GDP growth over the period. Despite these strong indicators, the pandemic and associated restrictions constrained growth. For instance, international travel to New Zealand plunged in 2020-21 and remained considerably low for the two years through 2021-22. The drastic drop in international tourists visiting New Zealand has limited the country's real GDP growth. As borders began to ease in 2022-23, New Zealand's tourism sector rebounded, resulting in a robust recovery in tourism earnings.

Global economic conditions have also hit GDP, with slowing economic growth in China, partly due to tightening credit conditions. For instance, the challenging economic condition in China has reduced consumers' spending on imported meat products, adversely impacting New Zealand's red meat exports in 2022-23. The Russia-Ukraine conflict has also created volatility in global markets. These uncertainties have weighed on consumption and investment decisions, limiting growth in real GDP. However, following declines in 2020-21, private capital expenditure recovered strongly in the two years through 2022-23. Overall, IBISWorld forecasts real GDP to increase at a compound annual rate of 1.6% over the five years through 2024-25.