Nicola Willis. Photo: RNZ / Reece Baker
The finance minister is warning the job market may not pick up until the second half of 2025.
The latest StatsNZ figures confirm the New Zealand economy has inched out of recession, growing 0.7 percent in the last quarter of last year, following six months of decline.
Nicola Willis told Morning Report she expects people to start to notice the improvement as mortgages are refixed at lower interest rates.
But she said employment is always the last thing to recover.
"The big thing that's going to be happening this year is that people are switching on to those lower mortgage rates," she said.
"So, for those households, they will feel more cash in their household budgets, and we expect to see increasingly that some of that will be spent in our local businesses, our local shops and that will have a flow through to the New Zealand economy.
"Unfortunately, employment is always the last thing to recover when an economy goes through as tough a time as New Zealand has.
"We don't expect unemployment to start coming down until the latter half of this year. When that happens, I think that will be a big boost to confidence. And we do expect that that recovery will accelerate through the year which is also positive. "
Willis acknowledged that housing had become too unaffordable for many Kiwis, and said the forecast doesn't show the rampant house price growth that has characterised previous recoveries.
She said that actually ends up leaving New Zealanders feeling worse off.
"We don't want a recovery in which more and more New Zealanders feel locked out of getting a home," she said. "When it comes to the Reserve Bank and its capital adequacy ratios, there's been a debate happening particularly through the Select Committee inquiry about what impact that has for New Zealanders.
"The concern I've had and I'm watching the Select Committee closely is this stopping and ending going to productive parts of our economy, agriculture, small businesses? Because if that is the case, that's a problem."
The main GDP growth spots were agriculture, up 1.4 percent, retail up 1.9 percent, and transport up 2.4 percent.
Those were partly offset by a 3 percent fall in construction, reflecting the slowdown in house building, and decreases in telecommunications and internet services.
Willis is optimistic growth can continue, despite the potential ramifications tariffs could have on New Zealand's exports.
"If you listen to Fonterra yesterday when they were announcing their result, they said 'look we've got products and markets all around the world of course we're very aware of what's happening in the trade space', but they're still forecasting a very high milk price next year. They're still forecasting profitability.
"Equally, I think tourists are going to want to continue to keep coming to New Zealand and we're doing everything we can to encourage that. So yes, there are global headwinds but actually New Zealand's pretty well positioned to navigate our way forward. "
She said she had been advised by the Treasury of what potential scenarios could be, but the challenge is the uncertainty of how it unfolds.
"There's a lot of second guessing happening at the moment where people are saying, 'look, there'll be retaliatory tariffs, and this will happen, and that will happen.' But things are still unfolding so it is uncertain.
"Of course, as you know uncertainty in itself can be problematic, but New Zealand I think will continue to fare well."
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
