New Zealand's recession could be 'harbinger for world', Bloomberg warns

  • 17/06/2023

Authorities around the globe will be keeping tabs on New Zealand's recession in what could be a "harbinger" for the world, according to Bloomberg.

The international business media outlet published an article this week, covering the news Aotearoa's economy was officially in recession, titled: Pacesetter New Zealand's recession may be harbinger for world.

While discussing the fact New Zealand's Reserve Bank (RBNZ) was among the first around the globe to hike interest rates to tackle COVID-induced inflationary pressures, Bloomberg said Aoteaora's recession was "a possible harbinger of what lies ahead for others".

New Zealand's gross domestic product contracted by 0.1 percent this quarter, according to data from Statistics NZ, as rising interest rates continued to weigh in on the economy. 

It was the second-consecutive quarterly contraction, placing the country in a technical recession. 

"New Zealand was one of the first to begin raising rates when inflation surged after the pandemic… outpacing even the [US] Federal Reserve," Bloomberg said. "Now the impact is starting to be felt as households already grappling with soaring prices see mortgage repayments jump."

The RBNZ revealed last month it was again hiking the official cash rate - up to 5.5 percent from 5.25 percent. 

However, Adrian Orr, the central bank's Governor, said New Zealand's inflation downturn was starting to become evident and would now be able to pause interest rate hikes.

The latest RBNZ monetary policy statement showed inflation was expected to fall to about 6.1 percent by the middle of this year - down from its 7.3 percent peak and current 6.7 percent level.