On the cusp. Nearly there. All the time.
Our recovery from the 2024 recession keeps being delayed
A Request
Some readers have been incredibly kind and have offered me money to write this Substack. That’s wonderful for my ego, but rather than giving me money, please go to https://union.org.nz/find-your-union/ and join your union. If you are already a member, thank you. If you aren’t, please have a look after reading this Substack.
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In the 2014 Election campaign, during the debate between John Key and David Cunliffe, the Prime Minister uttered the now-iconic phrase: “I think we're on the cusp of something very special for our country, I'd like to be our Prime Minister and lead us to that”. Since then, New Zealanders have been waiting for National to elaborate on what exactly this “something very special” is. Unfortunately, delivery has been delayed.
The latest iteration of this kind of promise comes from the current Finance Minister, Hon. Nicola Willis. Budget 2025 apparently “secures New Zealand’s economic and fiscal recovery and advances reforms to make New Zealanders better off in future”. When asked last week in the House about economic forecasts, Ms Willis stated, “It is clear that the economy is recovering”. In the famous words of the Band D:Ream during the 1997 UK Election, “Things can only get better”.
Sadly, New Zealand’s economic recovery from the self-induced recession of 2024 feels more like a Samuel Beckett play than a ‘90s pop anthem. In Waiting for Godot, the characters spend their days waiting for someone whom they believe will provide them with salvation. The economic data we have suggests that our recovery keeps being delayed.
Let’s look at GDP growth. In February this year, the Reserve Bank forecast that quarterly GDP would be the same size as it was at the election (September 2023) by June 2025. By May, that recovery date was pushed back to September 2025. Now, in August, the forecast has shifted again, with recovery now expected by December 2025. The August forecast even shows a double-dip fall in our growth. In just six months, our recovery has been delayed by a further six months.
Figure 1: Seasonally Adjusted Quarterly Production GDP ($M) – RBNZ 2025 Forecasts
Source: Authors' Analysis of RBNZ MPS Forecasts
Now, let’s turn to employment. The employment rate for New Zealand never returns to the level it was at during the election (69.2%). Given the challenges facing the economy, this is not surprising. However, the employment forecasts mirror the pattern of GDP: they keep falling. By December 2025, the employment rate is forecast to be nearly one percent lower than predicted six months earlier. By September 2025, there will be an estimated 50,000 fewer people in work than initially forecast. The labour market recovery, once again, is delayed
Figure 2: Employment Rate (%) - RBNZ 2025 Forecasts
Source: Authors' Analysis of RBNZ Forecasts
Another area to consider is housing. Residential investment is expected to continue falling from its peak at the 2023 election. Given the then record levels of consents and skyrocketing housing prices, this is not unexpected. However, the recovery continues to falter. Each of the past three Reserve Bank forecasts shows continued deterioration in this area. The housing crisis is likely to persist and worsen.
Figure 3: Real (09/10) $m Seasonally Adjusted Residential Investment - RBNZ 2025 Forecasts
Source: Authors Analysis of RBNZ Forecasts
Even the cost of living, which was supposed to be the subject of a "laser-like focus" is on the rise – though only slightly (from 7.2% cumulative inflation in Feb to 7.5% in August). It’s fair to say that there has been no significant progress on this issue over the past six months. The expected falls in inflation are based on tradeable good prices almost standing-still for a year. Somehow, the value of our commodity exports is going to keep rising, while the value of imports is forecast to remain static. This seems highly unlikely
Figure 4: Cumulative CPI Inflation (%) – RBNZ 2025 Forecasts
This data may partly explain why the Reserve Bank continues to cut interest rates despite inflation sitting at the upper end of the RBNZ’s target band. In fact, if you exclude petrol, CPI inflation is already above the 1-3% target range (currently 3.2%). Food prices are up 5%. Electricity pricing is up 11%, Gas 14%. The only inflation rate falling consistently is rents. The only inflation rate consistently falling is rent. Rents are tied to incomes and demand, and a stagnating rental market is symptomatic of a slowing employment market.
So, when you hear talk of ‘green shoots’ in the economy, remember that the date for those shoots keeps getting pushed further back. When you hear there’s light at the end of the tunnel, recall that the tunnel keeps getting longer. Importantly, when the recovery does come, it might not be for everyone. The full-time (40-hour) average annual wage in September 2026 is now forecast to be $624 lower than the forecast made just six months ago. With inflation higher, the real value of wages will be even less.
Don’t therefore be surprised if the recovery is delayed again. There are a lot of economists putting a lot of weight on the idea that we will be heading into a period of normalisation after President Trump’s tariff changes. I think that’s optimistic. Government and residential investment are forecast to keep falling according to the Reserve Bank. There is no domestic engine of growth in New Zealand. Any further delays should have National Party List MPs very concerned indeed.
In this Newsroom article https://newsroom.co.nz/2025/08/23/anne-salmond-who-is-this-government-working-for/, one commentator, Bill Hales, underneath the article wrote:
I’ve got a question that IS worth while pursuing. How do we get the citizens of Aotearoa to understand the governance crisis we’re facing and unite in a movement to overthrow the current administration? May I suggest that waiting to see what happens at next year’s election is not going to suffice. This is a crisis that’s been building, slowly but surely, over forty years or more. It’s been a long time in the making and now it’s right at the door. Best we get our heads together and develop a response that sees this administration out of parliament and buried. A good start is to identify the enemy, and I don’t use that word lightly. The enemy is not solely the motley collection of parliamentary ‘representatives’ beavering away at the beehive, these are actually the real enemy’s representatives. The real enemy to our democracy and livelihoods are the corporate masters. Let’s make no mistake over where the threat is coming from, the coalition politicians are their well reimbursed puppets, not the brains behind the operation. This is a massive corruption operation passing itself off as governance. Somewhere in the middle of this onslaught is the overtly benign but actually dangerous Atlas Network, whose New Zealand operation is administered by The NZ Institute.
This is a our challenge on the Left. I recommend the article and the comments below to all your readers.
As a member of the Labour Party policy council please ensure that the MP's (who were always in my 43 years in the Party generally ignoring of party members opinions, bar some who were often in a minority) are listening to alternative economic thinking. I find it offensive that inflation is of greater importance than people being in jobs. NZ currently has 150,000 young people under 25 not in work or training. That is a national disgrace based on a theory which both major parties subscribe to.