A United Nations report is warning high rental prices are likely to limit progress on curbing New Zealand's high inflation rate this year, meaning the cost of living crisis is not over yet.
The United Nations released its 2024 World Economic Situation and Prospects report last week which projects inflation in New Zealand to fall fairly gradually over the next 12 months.
The report said New Zealand's inflation will remain "relatively high" in 2024 due to an acceleration in rental prices driven by housing supply shortages.
New Zealand's consumer price index is projected to fall to 3.4 percent in 2024 before dropping to 2.6 percent in 2025.
Kiwis have been battling the cost of living crisis since 2021 with inflation currently remaining stubbornly high at 5.6 percent - more than double the Reserve Bank's (RBNZ) target.
The UN's consumer price forecasts are slightly behind what Treasury has predicted for when New Zealand will return to the RBNZ's target band of 1-3 percent.
Treasury released its Half Year Economic and Fiscal Update (HYEFU) in December, which predicted inflation would fall within the target band in late 2024.
The UN report said the economic situation in New Zealand and other developed economies in Asia-Pacific like Australia is facing "strong headwinds".
The UN has pencilled in real GDP growth of 1 percent for New Zealand in 2023, with the official data for the final quarter of the year yet to be released. That's down from 2.7 percent in 2022. The UN is expecting growth to edge up to 1.1 percent in 2024 and 2.2 percent in 2025.
"External demand from major trading partners (including the United States and China) has weakened, while monetary tightening in Australia, New Zealand and the Republic of Korea has constrained domestic demand growth," the report said.
"Growing fiscal consolidation efforts following large fiscal expansions during the COVID-19 pandemic are further depressing domestic demand. While the Governments have implemented policy measures to help their citizens cope with the cost-of-living crisis over the past two years, the impact of these measures has been largely neutral or weak in terms of affecting economic expansion."
New Zealand's labour market also surged to record lows during the COVID-19 pandemic and the report predicts it's going to remain "tight" this year despite record migration.
"Tight labour market conditions led to rapid wage growth, which continued even after the headline inflation rate peaked in 2022, particularly in Australia and New Zealand," the report read.
"While nominal wage growth has been driving current inflation, the consequent negative real wage growth has eroded household purchasing power."
United Nations secretary-general António Guterres had a grim message about the economic outlook for 2024, saying this year was projected to be another tough year.
Guterres said sluggish global growth, weak investment, spiralling debt crisis, devastating conflicts and escalating extreme weather events are bringing uncertainty and risk to the global economy.
"The result: development delayed and denied. 2024 must be the year when we break out of this quagmire," he said in the report.
"By unlocking big, bold investments we can drive sustainable development and climate action, and put the global economy on a stronger growth path for all."
It comes as Kiwis continue to battle the cost of living crisis. The price of food is an unwanted headache, with Stats NZ releasing figures in November showing food prices remained 6 percent higher in November last year than they were 12 months earlier.
New Zealand is also on the brink of another recession after the RBNZ revealed in December gross domestic product had fallen by 0.3 percent in the September quarter from the June quarter.
This means New Zealand is only one quarter away from being in a technical recession. The next update is due in March.
Then adding to all this, thousands of Kiwis are re-fixing their mortgages from a low rate seen during COVID-19 of around 2-3 percent to new rates of around 6-7 percent.
