New Zealand

New Zealand’s economy exited recession with modest expansion in the first quarter, Bloomberg News reported. Gross domestic product gained 0.2% from the previous quarter, when it declined 0.1%, Statistics New Zealand said Thursday in Wellington. Economists expected 0.1% growth. GDP rose 0.3% from the year-earlier quarter, beating the 0.2% estimate. The economy is struggling as the Reserve Bank keeps its key interest rate at 5.5%, the highest since 2008, to bring inflation back under control.

New Zealand’s central bank expects inflation to continue to slow but said it needs more time to be certain. Good progress is being made in bringing inflation back to the Reserve Bank’s 1-3% target band, chief economist Paul Conway said in a speech Wednesday in Wellington. Increasing spare capacity in the economy and declining inflation expectations are likely to further reduce price pressures, while “sticky” domestic costs are also expected to eventually abate. “These processes could occur more quickly or slowly than currently projected,” he said.

The Reserve Bank of New Zealand has confirmed it will apply new restrictions on mortgage lending in a bid to reduce potential financial instability risks stemming from high household debt and rising home prices, the Wall Street Journal reported. The debt-to-income settings, which will apply from July 1, will allow banks to lend up to 20% of residential loans to owner occupiers with DTI ratios of over six and to investors with a DTI ratio of over seven, the central bank said on Tuesday.

New Zealand manufacturing sector showed tentative signs of recovery in April, despite the economy’s lengthening recession, according to the latest BNZ — BusinessNZ Performance of Manufacturing Index, the Wall Street Journal reported. The seasonally adjusted PMI for April was 48.9, up from 46.8 in March, although still lower than the 49.1 recorded in February. The sector has now been in contraction for 14 consecutive months.

The Reserve Bank of New Zealand has limited scope to cut interest rates this year and shouldn’t ease policy until it’s sure inflation will return to target, according to the Organisation for Economic Cooperation and Development, Bloomberg News reported. "Inflation is likely to be persistent,” the OECD said in its Economic Surveys: New Zealand 2024 report published Monday in Wellington.

New Zealand unemployment rate jumped sharply in the first three months of this year as the economy slumbered in an extended recession and high interest rates continued to batter household budgets, the Wall Street Journal reported. The seasonally adjusted unemployment rate was 4.3% in the first quarter, well up from 4.0% in the prior quarter, Stats NZ said Wednesday. Over the year to the first quarter, the unemployment rate rose 0.9 percentage points.

The Reserve Bank of New Zealand left its official cash rate steady at a policy meeting on Wednesday, but signaled that the rate will need to remain restrictive for some time yet given that inflation remains high, the Wall Street Journal reported. The OCR was held at 5.5%, which was widely expected by economists. “While some near-term price pressures remain, the Monetary Policy Committee is confident that maintaining the OCR at a restrictive level for a sustained period will return consumer price inflation to within the 1% to 3% target range this calendar year,” the central bank said.

New Zealand’s farm-rich economy was in recession in the final three months of 2023 despite a jump in population growth, with economists now expecting the central bank to fall in line with many of its global peers and deliver interest-rate cuts in the second half of the year, the Wall Street Journal reported. Gross domestic product growth contracted 0.1% in the fourth quarter, following a 0.3% contraction in the third quarter, Stats NZ said Thursday. GDP has contracted sequentially for four out of the past five quarters.

New Zealand central bank governor Adrian Orr has issued a warning about crypto currencies such as stablecoins, saying they are no substitute for fiat money, Bloomberg News reported. Stablecoins are “the biggest misnomers” and “oxymorons,” Orr told a parliamentary committee Monday in Wellington. “Stablecoins are not stable. They’re only as good as the balance sheet of the person offering that stablecoin.” Stablecoins, a form of crypto token pegged to another asset, use large reserves to support their value.