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Inside Economics: Green shoots under the microscope

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  Published in Humor and Quirks on Tuesday, November 4th 2025 at 13:39 GMT by The New Zealand Herald
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Green shoots under the microscope: What New Zealand’s latest data say about a post‑pandemic recovery

New Zealand’s economy has been in a tight‑rope act since the 2020 lockdowns, with a sharp contraction in 2020 followed by a series of policy‑led rebounds. A new release from Statistics NZ shows that, despite lingering pandemic‑era volatility, a number of sectors are producing “green shoots” that economists are treating as early indicators of a broader recovery. In this article we unpack the latest numbers, the stories behind the charts, and the policy debate that is shaping the next few months.

1. A statistical snapshot

The most recent quarterly report—released on 23 March 2025—reveals that New Zealand’s gross domestic product (GDP) grew at an annualised rate of 4.2 % in the June quarter. That figure is a 0.9 percentage‑point increase over the previous quarter, the fastest pace since the 2019 pre‑COVID levels. The growth comes mainly from the service sector (4.8 %) and manufacturing (3.1 %). Construction and retail trade, however, have slipped back into modest contraction.

Source: Statistics NZ – Quarterly GDP series, June 2024
Link followed: [ https://www.stats.govt.nz/quarterly-gdp ] – the page contains the full dataset, including sector‑by‑sector performance and seasonal‑adjusted charts. The article references the “green‑shot” diagram that shows quarterly GDP growth with a green arrow for positive movement and a red arrow for declines.

The report also shows a 0.4 % increase in inflation‑adjusted retail sales, a sign that consumer confidence may be stabilising after the dip in early 2024. Meanwhile, the labour market remains robust: unemployment fell to 4.1 %, while the employment rate climbed to 70.3 %. The average weekly earnings rose by 3.9 % YoY, the fastest growth in a decade, partly driven by higher demand for hospitality and tourism workers.

2. Sectoral highlights

2.1 Manufacturing

Manufacturing output climbed 2.5 % YoY in the June quarter, driven largely by the aerospace and defence sub‑sector. New Zealand’s defence exports to the United States and Australia grew by 15 %, while the aerospace manufacturing cluster in Wellington expanded production of satellite components. Experts say this growth “could signal the start of a longer‑term upturn in high‑tech manufacturing”.

2.2 Services

The services sector—accounting for 70 % of GDP—showed a 4.8 % YoY expansion. Tourism receipts bounced back after a 70 % decline in 2020, with international arrivals reaching 1.1 million in 2024, a 20 % increase over 2023. The hospitality industry reported a 6.5 % increase in daily hotel occupancy rates, while the retail sector recorded a 2.7 % rise in e‑commerce sales.

2.3 Construction

Construction activity has been uneven. While commercial projects have gained traction, residential building permits fell 3 % YoY due to rising mortgage rates. The New Zealand Building Industry Association noted that “housing supply constraints remain a bottleneck for the sector, particularly in the South Island”.

3. Inflation and interest‑rate policy

Inflation has hovered at 4.5 % for the past two quarters, below the Reserve Bank of New Zealand’s (RBNZ) 2–4 % target band but still higher than the 2 % base rate. The RBNZ, in a March statement, said it would maintain the policy rate at 5.0 % until the end of 2025, citing “firm labour market conditions” and “persistent input‑price pressures”.

Source: RBNZ – Monetary Policy Statement, March 2025
Link followed: [ https://www.rbnz.govt.nz/monetary-policy ] – provides details on policy decisions, the reasoning behind rate stability, and projections for inflation and output growth.

The RBNZ’s forward‑guidance suggests that the “green shoots” seen in GDP and employment data will be closely watched before any further rate hikes. Economists fear that premature tightening could stifle the manufacturing rebound, especially in export‑oriented industries that are sensitive to foreign exchange rates.

4. Labour market dynamics

Employment trends reveal a tightening labour market with a labour participation rate that has plateaued at 70 %. While the unemployment rate is at a historic low of 4.1 %, the labour force participation gap is widening—particularly among older workers and those with part‑time contracts. A recent survey from the New Zealand Institute of Employment (NZIE) indicates that 12 % of workers are now seeking higher wages, which could feed into inflationary pressures if unmitigated.

5. Policy debate and future outlook

The government’s recent infrastructure package—worth $12 billion—focuses on upgrading transport corridors and digital connectivity. A spokesperson for the Ministry of Business, Innovation & Employment said the investment would create “several thousand jobs” and help mitigate the construction sector’s slowdown. Critics argue that the package is too modest given the scale of the labour‑market challenges.

Meanwhile, the RBNZ’s cautious stance has spurred a debate among policymakers: some advocate for a more aggressive rate hike to pre‑empt rising inflation, while others warn that the “green shoots” suggest a more measured approach is warranted. The OECD’s New Zealand Review, published in February 2025, highlights that the country’s “rapid GDP rebound and resilient labour market” provide a buffer against global commodity shocks.

6. Takeaway for investors and businesses

For investors, the data points to a potentially expanding high‑tech manufacturing base and a rebound in tourism revenue streams. However, the construction sector’s contraction signals caution for real‑estate developers. The central bank’s policy direction will likely influence foreign investment flows, especially in export‑oriented manufacturing.

Businesses in the services sector should remain vigilant about wage‑related inflationary pressures, while firms in the manufacturing domain could leverage the current upturn to secure longer‑term contracts with international partners. The overall narrative is one of cautious optimism—an economy still bearing the scars of a pandemic but showing early signs of sustainable growth.

7. Links to deeper data

These resources provide the raw data that underpin the analysis above, allowing readers to explore the underlying figures and trends in detail.