Despite experts predicting growth of just 0.9% for the quarter, the economy has surpassed expectations by growing 2% for the September quarter. Stats NZ reported that much of this has can be attributed to a surge in the service activity and growth in exports following the re-opening of the NZ border.
The economy grew by 6.4% in the year ending on September 30. This result places the country well ahead of other developed nations whose annualised growth rates were reported to be 1.9% for the US, 2.4% for the UK, and 5.9% for Australia. However, despite the news, the Treasury and central bank still expect the economy to fall into a shallow recession in 2023.
According to ASB senior economist, Nat Keall, the results showed that the NZ economy was proving exceedingly resilient. He, however, cautioned that growth was still expected to slow down during 2023 as the Reserve Bank was expected to hike interest rates considerably. This is alongside slowing global growth, a cooling housing market and capacity challenges.
Finance minister, Grant Robertson, said that the strong growth would give the country’s economy a strong starting point as global growth was expected to slow in 2023. This cautious mood may be the reason the kiwi dollar remained mainly unchanged following the announcement. He reiterated the government’s commitment to keeping supporting Kiwis with the cost of living pressures by carefully managing the government’s finances.
The government is expected to maintain its ultra-hawkish fiscal policies designed to reduce inflation. Robertson said that the government was now no longer contributing to growth through spending. Government spending fell by 1.8% in the September quarter and was flat in the previous quarter. Robertson confirmed that the size of the economy stood at NZ$375 billion.
ANZ senior economist, Miles Workman, the macroeconomic stimulus had helped to boost domestic demand and compensate for the loss of business from exports that were affected by the closed border. Workman said that with domestic demand slowing, services exports were normalising due to the reopened border. He further noted that with inflation and labour scarcity as they were, there were unlikely to be changed to the government’s monetary policy outlook.
With the services segment, computer system services, travel agency and tour arrangement services, and recruitment services were found to have driven growth. In addition, growth was also reported in the transport, warehousing, and postal sectors which grew by 9.7%. The re-opening of the borders was found to have stimulated spending on both domestic and international air travel. Spending also rose in the construction sector, driven by increased spending on residential, non-residential, and infrastructure investment.
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