And then there was none.
According to the NZ Institute of Economic Research's latest quarterly 'consensus' forecasts, there will be zero GDP growth in the year to March 2025.
That forecast is down from the estimate of 0.6% growth in the 12 months to March 2025 made in the last quarterly forecasts issued in June. The June forecasts themselves had been revised down from earlier forecasts issued in March.
Official GDP figures for the June quarter 2024 are set to be released on Thursday and are expected to show that the economy contracted again in the quarter. If that proves to the case, it will mean that the NZ economy has shrunk in five of the past seven quarters.
NZIER senior economist Ting Huang said the downward revisions in economic forecasts "reflect expectations for sluggish economic growth over the coming year".
She said recent data, such as NZIER’s Quarterly Survey of Business Opinion measures of business confidence and firms’ own trading activity "also suggest a deteriorating growth outlook for the coming year".
"Beyond 2025, lower interest rates are expected support a recovery in economic activity."
Indeed, the forecasts suggest that in the 12 months to March 2026 there will be 2.2% growth in GDP.
Contributors to the consensus forecasts include economists from NZIER itself, Treasury, the Reserve Bank (RBNZ) and the country's 'big five' banks.
Huang said forecasts for household spending also suggest a deteriorating outlook for the coming year, with the annual average growth revised lower from 0.5% to 0.2% for 2025.
"Households have cut back sharply on discretionary spending as they face increased mortgage repayments.
"On top of this is the uncertainty over household income due to a slack labour market, and this is expected to weigh on household spending over the coming year," Huang said.
"The residential investment outlook for 2025 was slightly less negative than the previous forecasts, but growth forecasts for the subsequent years were revised lower. While it is expected that lower interest rates should support a renewed interest in residential investment over the coming years, some of this will be offset by the uncertainty over mortgage serviceability given the softer labour market," she said.
The inflation outlook has been revised lower for both 2025 and 2026 as well, with forecasts pointing an annual inflation as measured by the Consumers Price Index (CPI) of 2.3% by March 2025 and staying near the Reserve Bank's 2% inflation target mid-point (of the 1% to 3% targeted range) in the subsequent years.
"The revised forecasts point to expectations for annual CPI inflation becoming anchored over the coming years," Huang said.
47 Comments
Anyone else see that there is an elephant in the room re
- Economists prediction of economy / unemployment / GDP in 2025 and
- Economists predictions of house price movements in 2025
Remember even Big Bird gets it
One of these things is not like the other......
I was fly fishing the other day on a river in a forestry block and the loggers where dropping trees close by, you could hear the saw stop, then a cracking noise, then about 2 seconds later the shock wave as the tree hit the ground.... I think we are hearing cracking noises all over the NZ Economy at the moment... and there are going to be shockwaves all the way too Xmas and then likely after as many retailers go to the wall.
Remember even Big Bird gets it
Never underestimate the water coolers and neighborhood BBQs for subjective reads on economic sentiment.
Nevertheless, I agree with the economists' revisions. Because they have come to a new realization, whether it's through SQL databases or whatever.
People need to understand that 'when the facts change', you need to revise how you perceive and think about things.
I made a similar point recently, and got some good responses.
Firstly it’s only really a problem for them if there is a credible opposition….
Secondly they are probably banking on things improving before the next election, through cyclical and OCR-driven influences, which I think is likely
In the past you took on more debt, asset went up, sold took profit and paid debt back.
Now if you get out you take loss.
NZ Men don't take losses, hence they are stuck in the trade, l think even at lower OCR stuck in cash flows they do not want or paying off non performing investments is going to be a huge drag on new investment and discretionary spend.
It's ok, if you take some specific data over a chosen time frame, from a small area of the country, you can call a press conference to announce some good news. There were 23 new jobs created in South Taranaki in the last 24 days! Look at us, aren't we fantastic stewards of the economy? (See also crime rates in central Auckland)
National are banking on house prices rising in 2026. Once swing voters are back riding happily in the increasing equity saddle, the election will be a done deal.
I'm torn - house prices go up with the sales volumes (3 - 6 month lag), and sales volumes pick up very quickly after rates fall. The big question for me is whether the latent demand amongst wannabe FHBs in crappy rentals and young families waiting to pounce on an upgrade / school place is greater than the surplus stock. When I looked at this in detail in the UK, the data showed rate falls always led to surges of activity and prices in the most desirable areas. We'll see.
Forgive the anecdote, but I work with people from several youngish families. Most have one or more young children. They are sat in pretty small houses worth $700k to $800k and they have varying amounts of equity. The bottom of the market is their opportunity to get a bigger house in an area with decent schools. They are poised. This latent demand is why houses in desirable areas always go up first when house prices start to climb. It can also explain why you often see a fall back after the initial surge.
They have to sell those houses first, before they can buy another. Who's buying them? FHB and investors presumably. Both will need to get back into the market to absorb all those "starter houses". That wont happen until rates are significantly lower and employment levels more stable.
I'm shocked I tell you. Shocked!
Luxon and government asleep at the wheel, focusing on populist politics that divide the nation instead of focusing on economy and reducing the impact of high interest rates.
I know it's too late but have really been questioning the choice of government as of late.
If the standard definition of being in a recession is two consecutive quarters of negative growth, then shouldnt we need to see two consecutive quarters of positive growth to say we are out of recession? If you used that definition then we have been in recession for almost two years and counting.
"Beyond 2025, lower interest rates are expected support a recovery in economic activity."
While it is expected that lower interest rates should support a renewed interest in residential investment over the coming years...
So the solution is to encourage the same thinking that created the current situation...
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.