The New Zealand economy would be deep in recession if it were not for record high migration, an ASB economist says. Photo: 123RF
Analysis - New Zealand's economy is going through an undeniable downturn.
Unemployment is up, gross domestic product (GDP) is down and sentiment has fallen significantly.
But economists warn that the situation may be worse than the headline figures indicate.
Here are five things that could show that the economy is in worse shape than you think.
GDP per capita
Gross domestic product (GDP) has recorded four slight contractions in the last five quarters - perhaps indicating we've had a soft landing as the brakes went on the economy.
But what those figures do not show is the extent of the population increase over that same period.
The country has had a record influx of migrants so on a per capita basis, GDP was down 2 percent in December compared to September, and 2.8 percent over the year to December.
"Had we not seen the increase in migration we've seen, the nominal numbers would be a lot worse," Jarrod Kerr, chief economist at Kiwibank, said.
Kim Mundy, a senior economist at ASB, said she expected GDP per capita to continue declining until early to mid-2025. "The New Zealand economy would be in a pretty deep recession right now if it wasn't for record high immigration."
Spending data
In April, the value of electronic card transactions was down 0.4 percent on April in the retail industries and down 0.7 percent in core retail industries.
Mundy said retail activity was another indicator of weakness.
"It's been flat to falling… But with high inflation and high population growth if that spending is flat to lower it shows how much households are pulling back on their consumption."
Kerr said retail sales numbers had shown nine contractions in a row.
"People are spending less because they've been hit hard by inflation and higher interest rates. The dollar amount of spending is slightly higher but because we've had so much inflation, when you deflate it for price increases, people are getting less.
"They are spending more but getting less in volume. That highlights the weakness."
Non-tradeable inflation
Tradeable inflation (that's the type that is influenced by global factors) has come down much more quickly than domestic inflation.
The problem is that it is domestic inflation that the Reserve Bank can hope to influence.
"The worry there is that the economy feels bad," Infometrics chief executive Brad Olsen said.
"Everyone says the economy feels bad. Pricing pressures are not reflecting that enough."
He said normally when there was not as much spending, businesses would not put up their prices as much.
"But businesses are still putting up prices."
He said factors such as local government rates, rent and insurance were particularly sticky.
"If the Reserve Bank has to get inflation back to 2 percent, it almost does imply they might have to hit or keep the pressure on longer so you squeeze all the other parts of the economy more so the average number gets down to 2 percent."
The Reserve Bank hinted at that on Wednesday, when it indicated a hike still remained a possibility if inflation did not fall as expected.
Financial stress
The number of consumers behind on credit payments reached 463,000 in March, up 6000 on the month before.
That is equal to 12.7 percent of the "credit active" population.
Just under 1.5 percent of mortgages were in arrears.
Businesses were also being liquidated at a faster rate - the 230 companies put into liquidation during March was the highest number since March 2015.
ANZ chief economist Sharon Zollner said it was important to put these data points in historical context because they were still low compared to periods such as the Global Financial Crisis.
"That's not to say there is no stress out there, we can see that in financial hardship withdrawals, foodbanks."
The number of consumers behind on credit payments reached 463,000 in March. Photo: 123rf
Unemployment was still low but many people who were working were still financially stressed, she said.
The impact was also being primarily felt by younger generations who had not experienced a downturn before, and lower-skilled workers who were facing more competition from migrant workers.
"The fact that the migration wave has been so enormous and low-skilled, its impact on the labour market is going to be particularly brutal for the lower-skilled end."
NZ Council of Trade Unions economist Craig Renney said NEET figures - representing young people who are not in employment, education or training - were particularly concerning.
In the March 2024 quarter, the seasonally adjusted proportion of people aged 15 to 24 years old who were NEET was 12.4 percent. It was 10.9 percent a year earlier.
Tax take
Leading up to the Budget, government revenue is tracking $1.6 billion below forecast. The government said it collected $1.2b less in core tax in the nine months to March than Treasury had forecast in its half-year update.
"Corporate tax in particularly is relatively low," Westpac chief economist Kelly Eckhold said.
"It reflects the fact that business profitability is declining as the economy has got tougher. Our view is the economy is bumping along the bottom right now. We are not expecting much in terms of growth in the first half of the year but are optimistic things could get better in the second half."
