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The Guardian - AU
The Guardian - AU
World
Tess McClure in Auckland

New Zealand avoids recession as eased Covid measures help spur 1.7% GDP growth

Silhouetted figures in an airport departure lounge with Air New Zealand jets in the background.
Border reopenings and the relaxation of Covid restrictions helped New Zealand’s economy to 1.7% growth in the June quarter. Photograph: Mark Baker/AP

Increased spending on travel and leisure driven by eased Covid restrictions has helped helped New Zealand dodge recession, with its economy growing 1.7% in the quarter that ended in June.

That growth reverses a 0.2% drop in GDP the previous quarter, and means the country escapes a “technical recession”, defined as two consecutive quarterly drops in GDP.

The rise is mostly driven by a relaxation of the country’s Covid measures. With the reopening of borders and the lifting of internal restrictions, spending on air travel, accommodation, restaurants, bars, sports, recreation, and travel agency services all rose.

The services sector, which makes up about two-thirds of the economy, was up 2.7%. Transport, postal, and warehousing were up 19.7%, driven by an increase in spending on air transport, Stats NZ said on Thursday.

The rise, while small, will be welcomed by the government, which has been battling falling support as New Zealanders struggle with mounting inflation and high cost of living.

Finance minister Grant Robertson said the numbers indicated New Zealand was “well positioned to respond to the challenges ahead,” amid grim international economic forecasts.

“The global economic outlook is being revised downwards as high inflation, the war in Ukraine and ongoing pandemic-related disruptions continue to affect the countries we trade with,” he said.

“We are not immune to what happens beyond our borders, but we start on the front foot and with optimism.”

New Zealand had a larger quarterly increase than a number of the countries it compares itself to. It was ahead of the OECD June quarter GDP rise of 0.4%, the United States’ 0.1% decline, and Australia’s rise of 0.9%.

Opposition spokesperson Nicola Willis said the rise in GDP would not stop New Zealanders from feeling the heat of inflation, however, and said that on an annual basis the country’s economy had grown just 1% in the year to June, behind comparison countries like Australia.

Stats NZ data showed that compared to the same quarter a year earlier, New Zealand’s growth was just 0.4 percentage points – well behind the OECD total of 3.7, Australia’s 3.6, or the UK’s 2.9.

“While it is welcome that New Zealand has so far avoided a recession, weak growth comes as inflation remains at the highest rate in a generation,” Willis said.

“In the year to August 31, food prices rose by 8.3 per cent, the highest in 13 years … most Kiwis are going backwards as their wages struggle to keep up with rising prices.”

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