Reports out of New Zealand today that New Zealand Treasury plans to revise economic and fiscal forecasts due to a sustained slowdown in productivity.
In brief:
- Economic recovery, previously expected in late 2024, is now anticipated to begin later, according to Chief Economic Adviser Dominick Stephens.
- Slower economic growth is reducing tax revenue, increasing challenges for the government to balance its budget.
- The government reported a larger-than-expected deficit for 2023-24 but committed to disciplined public spending to achieve a surplus.
- Productivity levels in 2024 have reverted to pre-pandemic levels, with contractionary manufacturing and service activity indicating minimal growth.
***
As for the Reserve Bank of New Zealand. New Zealand’s economy contracted in Q2 2024, prompting the RBNZ to cut rates twice, this year, so far. Another reduction is expected at the November 27 meeting.
- The benchmark rate was cut by 50 basis points to 4.75% in October, following a prior August cut (first since March 2020).