New Zealand’s economy continues to lose momentum this year, experiencing its lowest annual growth rate since 2013. This dip has been accompanied by an increase in negativity across the news media, with businesses and consumers alike questioning international trade tensions, global economic health, and Brexit.
The country’s GDP increased by 2.5% from a year earlier, continuing similar totals recorded in the wake of the fourth quarter of 2018. On a quarterly basis, the economy only grew by 0.5%. Banks cut interest rates to 1.5%, a record low, hoping to lift economic activity and help get inflation back above 2%.
Moreover, since the September quarter, the country has seen a 35% drop in business confidence. Trading activity declined by 11% as well.
Looming above these figures is the continuing US-China trade war, which has continued to create problems for businesses around the globe. Manufacturing has fared poorly relative to previous years, and the ongoing nature of the trade war has dimmed hopes for an imminent recovery.
Manufacturing is the most affected area of the economy, as shrinking profits can be traced back to poor domestic and export demand. The construction industry finds itself in a bind as well, with some firms having to lower their expectations due to reduced commercial and residential activity. Retailers have likewise struggled to attract consumers, affecting profitability in other areas. As domestic and international pressures affect costs as well as pricing in most sectors, business will need to remain more cautious than it would like to be, especially where hiring and investing are concerned.
For the moment, businesses are uncertain about how to respond to the current economic issues they face, while some feel that the ultimate causes go deeper still. As the political fallout continues to be felt from the change of course initiated by the US and UK in 2016, and then later in other European countries, some see such developments as the natural outgrowth of a world where identity-based differences are easily accentuated.
Australia and New Zealand Banking Group senior economist Miles Workman thinks that the changes in global politics have fundamentally altered how people view the economy. He cites the influence of social media like Twitter to inflame passions, calling for moderation and restraint in the name of holding society together on a stable course forward.
At the same time, Westpac economist Michael Gordon views things differently. He believes that the current social crisis in certain other countries isn’t to blame. Instead of blaming external variables, he believes that domestic factors are the key to putting economies like New Zealand’s back on course.
With the economy growing just 2.1% over the past year, an increase in finger-pointing could be considered inevitable. It is said that success has many fathers, but failure is an orphan. Whether New Zealand’s economy is able to turn around next year, or if a longer wait is in store, one thing is all but certain: When increased trade and prosperity do return, all sides are likely to credit the turnaround as confirming their own interpretation of events – a fitting resolution, perhaps, in a time of significant discord.