Stats NZ has announced that the economy grew by an unprecedented 2.8% in the second-quarter ending in June. Economists had earlier predicted growth of between 1.1 to 1.5%, comparable to the 1.4% growth registered in the first quarter that ended in March this year. The Reserve Bank of New Zealand (RBNZ) had predicted a growth of 0.7%.
Annual GDP has reached 17.4% against a prediction by an earlier Reuters poll that had expected a 16.3% rise. This year’s strong performance was thanks to the country’s ability to limit and eliminate the coronavirus within its borders through restrictions in 2020. This allowed it to reopen its domestic economy earlier than other developed nations. Unfortunately, this success has been hampered by the most recent lockdown on Auckland.
Finance minister, Grant Robertson, said that the jump bodes well for a solid economic rebound from the effects of the current Delta variant lockdown. The most recent lockdown was instituted on 17 August following an outbreak of the Delta variant imported from Australia. This lockdown has been extended to 13 September, when Auckland is expected to move from level 4 to level 3.
Robertson confirmed that the announcement of GDP growth indicates that the New Zealand economy is outperforming many developed nations. He highlighted the US that grew by 1.6%, Japan by 0.5%, and Australia by 0.7%. He however noted that the UK was ahead having recorded a growth of 4.8%.
The growth has been majorly attributed to a boost in the services industry that reportedly makes up about two-thirds of the economy. Much was pegged on the tourism sector that briefly opened up the trans-Tasman travel bubble with Australia. The agricultural and good production sector following close behind. Industry experts expect a limited contraction in the economy for Q3, despite the current level 4 lockdown. Economists however expect quick revival as vaccination rates grow and the outbreak is contained.
There are also expectations that this will push the RBNZ to raise interest rates, a move that was suspended last month following snap lockdowns. ASB Senior Economist, Mark Smith, believes the RBNZ will review near-term volatility and seek to reduce monetary stimulus. He said that a 25 basis point hike may be possible from October.
Unemployment figures in Q2 also dropped to an 18-month low of 4% while annual inflation rose to 3.3%. This exceeded the central bank’s prediction of a 1 to 3% target range. The NZ$ also surged by 0.3% following this report, reaching $0.7320.
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