New Zealand is officially out of recession, but Trump’s tariff policy chaos remains a threat to medium term growth, writes Catherine McGregor in today’s bulletin extract.
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We are officially out of recession
You may not have known the headlines – “NZ Nz Out of Recession” said the Heraldwhile RNZ Opted for “tracks” – but the economic data released on Thursday by New Zealand statistics were indeed significantly better than most economists expected. New Zealand Gross Domestic Product (GDP) increased by 0.7% in the three months by December 2024, after a 1.1% decrease in September 2024. Economists’ predictions ranged from 0.2% to 0.5%. Kiwibank chief economist Jarrod Kerr said it was a “slightly positive surprise,” but growth was still in negative territory when seen year by year. “Compared to December 2023, the economy is still 1.1% lower,” he said.
ASB economist Wesley Tanuvasa said that although he received the news, the “wider opposite winds” – such as Trump’s fares – meant it was unlikely that the fourth quarter “growth factors could keep its pace by 2025”. These contrary winds also meant that RBNZ would be keeping its current interest rate range, he said. “In addition to 25 base-based cuts in April and May, the growing slope of the risk of falling for medium-term inflation prospects can see RBNZ continues with OCR cuts.”
GDP Result a small impulse for Luxon
Finance Minister Nicola Willis and the first -first interim minister, David Seymour, said the numbers were signs that “things are looking up” and indicated “the first green shoots of an economic recovery.” For Christopher Luxon, who pointed to the slow economic recovery as one of the main reasons for public dissatisfaction with the government, confirmation of growth will be especially good news. “There are other problems – school lunches, the debate about treaties and perhaps even the personal style of Luxon – that may be playing a role.” writes Liam Dann in Herald (Premium, Paywalled). “But history tells us that the economy decides the elections in the end. When voters feel things are improving, they don’t change governments.”
The tariff question
Back to the “wider -headed winds” and their impact on our economy. It is still unclear how Trump’s tariff turmoil will directly affect New Zealand-there are no nomination rates have been covered during the Winston Peters meeting with US Secretary of State Marco Rubio, whether the president remains in his vague reciprocity plans, we could eventually escape relatively insatched. As discussed in last Friday’s newsletter, Trump wants to impose rates on US imports that correspond to those already in force against US goods in his home country, but his government has not declared how the proportion would be calculated. New Zealand has a commercial surplus with the United States and imposes “comparatively few tariffs on US imports, while pays a larger amount to access the US market of 340 million people”, writes Thomas Manch in the post (Paywalled), so we may not be very hammered by new rates in our goods.
Obviously, as covered last Friday, New Zealand can still have significant second -order effects of the trade war, especially when it comes to damage to the Chinese economy.
Rubio wants NZ to increase defense spending
If Peters and Rubio didn’t discuss rates about what they said? While Peters remained with his mouth closed on the meeting, as well as saying that he was “seriously satisfied” with what it was, the US State Department issued a brief statement saying that the two discussed, among other issues, “avenues to strengthen defense cooperation through the sharing of burden, allowing our military to work more together and ensure security and economic force in the Pacific region.”
Manch notes (again) in the post“‘Burden sharing’ refers to the Trump government’s policy of removing allies and partners to increase their defense spending to change the expense of US global security.” Earlier this month the EU approved a massive increase in defense spending and “Rearm to Europe” amid signs where the US can no longer be based on the help of the states -MEMBROS if Russia attacks.
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