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Yep, it’s official, New Zealand is in recession. This means we’ve had two back-to-back quarters of slowing economic activity, measured by gross domestic product (GDP), which tallies the value of the goods and services we produce. It’s basically a glimpse under the covers of our economy - whether it’s up and running (growing), or it might be spending a couple of days in bed (slowing).
The December 2022 quarter showed a GDP drop of 0.7% and was followed consecutively by the 0.1% drop in the March 2023 quarter.
Interest.co.nz’s David Hargreaves describes the decline as the ‘merest fraction’ and suggests ‘we really should not get hung up on the 'R' word’. In the US, despite the Fed raising interest rates a whopping 10 times since September 2022 to slow inflation and some economists thinking a ‘mild’ US recession could be on its way, its economy continues to grow - just - and Morgan Stanley has said they may escape recession with a ‘soft landing’.
- The US job market continues to grow - adding more than 330,000 new jobs in May 2023
- The S&P 500 (VOO) has responded positively - showing YTD growth of more than 15%, and has pulled out of its October 2022 slump, rebounding 23%, and nearly 20% in a year
Should you be worried?
Global recessions have occurred on average every five to 10 years, and any number of impacts may have contributed to New Zealand’s slower economy - from the War in Ukraine, global oil challenges to supply chain issues, and according to Stats NZ, to January and February’s Cyclones Gabrielle and Hale. Possibly even the teachers’ strikes.
The Reserve Bank also wielded its sword. To slow borrowing, this May the RBNZ lifted the official cash rate (OCR) to a 14-year high of 5.5%, which can trigger banks to raise their interest rates. This is essentially the RBNZ pulling the brakes on the economy and making consumers tighten their belts and reduce their spending. Not ideal when you’re paying rent or mortgages.
But know that recessions (and rebounds) are a normal part of the economic cycle and New Zealand’s current recession is very slight. And remember, you managed your way out of the 2020 recession and if you didn’t apply them then, there are plenty of tips online to help you get through this one. 🧰
We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.
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