New Zealand Economic Snapshot
Economic Survey of New Zealand (January 2022)
The New Zealand economy recovered quickly from the COVID-19 shock thanks to effective virus containment, measures to protect jobs and incomes and highly expansionary macroeconomic policies but is now overheating and house prices have soared. The Reserve Bank has begun to tighten monetary and macroprudential policies with a view to achieving its price and financial stability objectives. Together with policy measures to increase housing supply, this should help moderate housing price inflation. While the fiscal deficit has begun to fall from the highs reached during the first wave of the COVID-19 shock, additional consolidation measures will be needed to put public finances on a sustainable path, including an increase in the pension eligibility age.
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Economic Forecast Summary (December 2021)
Economic growth should reach 4.7% in 2021, reflecting the bounce-back from the disruption caused by the pandemic, but will slow to 3.9% in 2022 and 2.5% in 2023 as macroeconomic policies tighten and capacity constraints are alleviated only gradually after the border begins to re-open in early 2022. Inflationary pressure will remain strong, as the economy continues to run above capacity and the labour market remains very tight, boosting wages. Growth may slow more markedly if vaccination delays among some population groups were to push back border re-opening.
Reform Priorities (April 2021)
Going for Growth 2021 - New Zealand
The economy recovered strongly, supported by large policy stimulus and an effective response to COVID-19, but some sectors hardest hit by border restrictions, notably tourism, lag behind. The pandemic highlighted a number of structural challenges. A key priority is to address the deteriorating access to affordable housing, which weakens financial resilience, hampers labour mobility and reduces inclusiveness.
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2021 Structural Reform Priorities
- Housing: Increase supply and quality of affordable housing
- Innovation: Promote innovation in tandem with export and foreign direct investment
- Labour market: Introduce a short-time work scheme and enhance support for unemployed jobseekers
- Education: Improve outcomes for students from vulnerable socio-economic backgrounds
- Child poverty: Monitor the impact of the COVID-19 crisis on income and material hardship and step up support if needed