This due to a mix of positive and negative indicators
The New Zealand economy will likely experience moderate growth between now and June 2025 with a mix of factors impacting performance, according to BusinessNZ.
The BusinessNZ Economic Conditions Index, which tracks 33 economic indicators, including GDP, inflation, and debt, sits at -1 for the June quarter, down seven points on the previous quarter but up four points on the previous year.
The index remained subdued as inflationary pressures remain elevated and as households face mounting pressure as fixed-term mortgages are set to roll off to more expensive rates. Commodity prices were also coming under pressure, leaving producers with squeezed profit margins as they continued to face high input costs.
On the positive side of the ledger, supply chain disruption has dissipated for the most part, while the numbers of migrants and tourists surge. Housing prices also seem to be bottoming out, due to a range of reasons, including interest rates appearing to have peaked, some easing in LVR, net migration ramping up increasing demand, and a possible change of government in October which could bring a reversal in tax changes, encouraging investors to take a greater interest in housing.
Regulatory policy, meanwhile, has been identified by BusinessNZ as a key concern, with several proposals creating uncertainty at a time when Kiwis are facing cost-of-living crisis, including change policy initiatives and many others that it said could inflict added costs on businesses and households.
It said that while the 2023 budget was focused on providing cost-of-living relief measures, it provided little assistance to most Kiwis, as the benefits depended on individuals’ current living situation. BusinessNZ also found it disappointing that the budget did not provide or signal tax relief.
With the government books still under pressure from the impacts of the pandemic, the wild weather events that hit North Island this year, and continued expenditure, revenue is also easing in line with reduced growth.
Meanwhile, the international economy still faces significant challenges, with geopolitical tension on several fronts, including the ongoing Russian invasion of Ukraine, continuing concerns over recent financial sector stress and the sustainability of public debt, along with continued inflationary pressure are adding to the cocktail of uncertainty facing international investors.
BusinessNZ expected general election uncertainty to encourage a wait-and-see approach to new investment and spending over coming months as businesses and households weigh up the potential impact of the various political parties’ policy approaches.
Catherine Beard (pictured above), BusinessNZ director of advocacy, said New Zealand’s economy is facing similar conditions to others around the world.
“Economic growth the world over is expected to be modest over the next few years, as countries and consumers start to focus inward,” Beard said. “In New Zealand, inflationary pressures remain elevated despite an increase in net migration. Although this should take some pressure off the labour market, household spending is increasingly restrained.
“House prices appear to have bottomed out but as households fix at new rates, sometimes much higher than they were initially tested at, the cost of living continues to rise.
“With an election on the horizon, investors are cautious. Policy announcements from all parties will play a significant role in spending in the lead up to October.”
Access the full report on the BusinessNZ website.
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