PHOTO: Statistics NZ on Thursday said the economy shrank 0.6 percent in the fourth quarter of 2022. Photo: 123rf

We will not know until another three months from now, but the economy could already be in a technical recession.

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But with unemployment remaining at a near-record low for the time being, the “real recession” will not be felt more widely until later this year and in early 2024, one economist says.

Statistics NZ on Thursday said the economy shrank 0.6 percent in the fourth quarter of 2022, worse than many had predicted. The Reserve Bank forecast 0.7 percent growth.

“If you cast your mind back to Q3, we did see the economy grow 1.7 percent quarter-on-quarter,” ANZ senior economist Miles Workman told Checkpoint.

“In a historical context, that’s a massive quarterly pace of growth. When you look at the Q4 data… naturally there’s just a little bit of payback.”


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The decline was driven by a fall in the manufacturing, exports, agricultural, accommodation and retail sectors, while construction bucked the trend, expanding 1.6 percent.

Workman said the data showed evidence households – some stung by higher interest rates – were tightening their belts, as were business investors.

“But at the same time there’s also biting capacity constraints for some industries. If you think about tourism, we did have a strong influx of tourist arrivals in the December quarter but many hospitality businesses just weren’t able to meet the demand because they couldn’t find enough labour, so they didn’t open the door.”



Despite the strength in some sectors and the economic boost the cyclone Gabrielle rebuild will generate, Workman said we were still on course for a recession.

“Simply because interest rates are rising. They’re a very potent driver of economic cycles, so I don’t think the cyclone and the extra activity that’s going to come along with that is going to change the broad story.”

Unemployment has stayed below 3.5 percent since mid-2021, so even if the economy contracts again this quarter, Workman said he would not call it a “real recession” just yet.

“The real recession that’s on the cards is probably something that’s not gonna really be evident in the labour market until the latter half of the year, and into 2024.”

ANZ was predicting at least two more hikes to the Official Cash Rate (OCR) to make sure it happens, to keep inflation in check – 25 basis points in each of April and May, taking the OCR to 5.25 percent, higher than it has been since the global financial crisis in 2008.