Summary
• NZ economy has quickly revived to pre-coronavirus levels, achieving a V-shaped recovery.
• Businesses and households are anticipating better days ahead amidst green shoots shining in the economy.
• Closed international borders and surging government debt continue to remain a subject of concern.
With pandemic turning the world upside down, the NZ economy endured its first recession since the Global Financial
Crisis in 2020. While the COVID-induced recession initially derailed the nation’s economic recovery, Kiwi Land has
managed to rebound sharply from its biggest economic slump.
Consequently, the NZ economy is all set to make an entry into 2021 on a strong footing.
The Kiwi government recently released ‘half-year fiscal and economic update’ for 2020, suggesting that the economic and
fiscal impact of the COVID-19 pandemic will be less severe than initially feared. The government believes that the
economy has weathered the virus storm better than expected despite a GDP contraction of 12.2 per cent in the June
quarter.
The recent performance of NZ economic indicators is providing strong evidence of the nation’s terrific recovery from the
COVID-19 crisis. With that said, let us quickly scroll through some bright spots gleaming in the economy:
1. Economic Growth Bounces Back
The latest GDP figures from Stats NZ suggests that the Kiwi economy is demonstrating V-shaped recovery from the COVID-19
recession. Following a significant contraction of GDP in the June quarter, NZ’s GDP surged by 14 per cent in the
September quarter 2020.
The exclusive COVID-19 elimination strategy coupled with policymakers’ unprecedented support appear to have underpinned
this solid economic recovery. Besides, the resurgence in household spending post lockdowns delivered a much-needed push
to the economic revival.
2. Business Confidence Picking Up Steam
NZ’s business confidence levels are soaring back to life, with businesses anticipating better days ahead. ANZ’s latest
Business Outlook indicates that the nation’s headline business confidence surged to multi-year highs in December 2020,
reaching at 9.4 per cent.
The business confidence leapt a whopping 16 points in December relative to November. Interestingly, the headline
business confidence was back in black for the first time since August 2017.
However, cost expectations also increased 6 points to a net 56.8 per cent of respondents reporting higher costs. ANZ
warns that mortgage rates might not remain at rock-bottom levels in case inflation pressures continue to mount.
3. Consumer Confidence Rising from the Ashes
New Zealanders appear to be regaining festive spirit as the year 2020 approaches the end. The recently released consumer
confidence data testifies the same.
The Westpac McDermott Miller Consumer Confidence Index surged by 10.9 points to 106 points in December, with Kiwi
consumer confidence marking a sharp turnaround. Growing optimism around the economic outlook has been bolstering
household sentiment in Kiwi Land.
New Zealanders are feeling more upbeat due to positive developments on COVID-19 vaccines and a considerable revival in
domestic activity. Besides, the impending holiday season is fostering spending appetites, with people spending more on
entertainment and dining out.
4. Retail Spending Continues to Escalate
Black Friday, Singles Day and Cyber Monday shopping festivals drove Kiwi Land’s retail spending to all-time highs in
November 2020. Besides, the year-end festivities are expected to give the retail scenario a further push.
Stats NZ latest data indicates that the nation’s total retail spending increased by 1.4 per cent in November 2020
relative to November 2019. New Zealanders primarily spent on durable goods like laptops and cell phones during the month
amid strong festive promotions.
Significantly, Kiwis reverted to online shopping in November instead of ferociously running around shopping malls. NZ
Post’s recent research demonstrated that Kiwis spent NZ$585 million online last month, out of which NZ$115 million was
spent in Cyber Monday and Black Friday sales.
5. Property Market Defying Expectations
NZ property market has been dancing to its own tune since June 2020, brushing aside the coronavirus risks. The market
has covered an unprecedented journey in terms of property prices, with median house prices hitting new highs in November
2020.
Latest statistics from the Real Estate Institute of New Zealand (REINZ) show that median house prices across Kiwi Land
rose by 18.5 per cent Y-o-Y to NZ$749,000 in November. Eleven regions across NZ saw median house prices hitting new
record highs during the month.
Notably, November was also an incredible month for property sales. The total number of residential properties sold rose
by ~30 per cent in November 2020 to 9,885 from 7,627 in November 2019. Notably, investors remained active in the market
to reap the benefits of low-interest rates and secure properties before the re-introduction of LVRs.
Even though promising signs are popping up in recent economic data, soaring government debt and rising inflation
pressure need closer attention. Besides, closed international borders weighing heavily on exports and tourism continues
to remain a subject of concern.