New Zealand Recession: According to Mint, New Zealand’s economy has contracted 0.1% “in the first quarter, after a fall of 0.7% at the end of 2022.”
The same report says a damaging cyclone is fuelling a “widespread downturn just months before national elections.”
New Zealand’s finance minister Grant Robertson said that it wasn’t surprising that New Zealand has finally entered the recession.
“We know 2023 is a challenging year as global growth slows, inflation has stayed higher for longer and the impacts of North Island weather events continue to disrupt households and businesses,” said Robertson.
Floods in Auckland and the destruction caused by Cyclone Gabrielle have also contributed to the economic downturn.
This would be New Zealand’s second recession when Covid-19 forced the country’s economy to shutter down.
Interest rates at 14-year high
Meanwhile, the country’s central bank raised the interest rates to a 14-year high, according to the BBC.
The Reserve Bank of New Zealand has aggressively hiked the cost of borrowing since 2021. BBC says the RBNZ was among the first countries that raised the lending rates after the pandemic struck. The New Zealand central bank even outpaced the U.S. Federal Reserve in this regard.
In May 2023, the New Zealand Reserve Bank revised its main interest rate to 5.5%.
This has put enormous pressure on New Zealanders who were already facing high prices. Now they will have to pay increased mortgage payments as well.
Why did prices rise in New Zealand?
Prices rose in NZ because the pent-up demand for goods and services shot up after the pandemic waned away.
Prices also went up because of the Russia-Ukraine War; everything became more expensive, from fuel to food.
A severe cyclone in New Zealand also disrupted the horticulture industry. This disruption has also contributed to the recession.
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