WELLINGTON, NEW ZEALAND (AP) – New Zealand’s economy has dipped into recession as higher interest rates take their toll, new figures released yesterday show.
Gross domestic product fell by 0.1 per cent in the March quarter, following a revised 0.7 per cent fall in the previous quarter, Statistics New Zealand said. That fulfils the nation’s definition of a recession, which is at least two consecutive quarters of negative growth.
The slowdown comes after New Zealand’s central bank raised its benchmark interest rate 12 straight times to 5.5 per cent as it tries to tame inflation. The rate is at its highest level since 2008, making it more expensive for people to borrow money for homes, cars and other purchases. The Reserve Bank of New Zealand has indicated it doesn’t plan to raise the rate any further for now and that its next move will be a cut.
The downturn in growth was in line with economists’ expectations, and the currency was little changed, with one New Zealand dollar trading at around USD0.62.
Taken over the full year, the picture looked rosier. New Zealand’s economy grew by 2.9 per cent after strong growth in the first two quarters. And with such a small dip in the March quarter, it’s possible the recession call could be reversed when the latest figures are revised next quarter.
Contributing to the drop in growth were a series of deadly weather events, including flooding in Auckland and a cyclone.
The biggest drivers of the downturn were business services, down 3.5 per cent, and transport, postal and warehousing, down 2.2 per cent. Going against the trend, media and telecommunications rose 2.7 per cent.
