The economy was disrupted in the first three months of the year, when COVID-19 swept the country for the first time.
| New Zealand’s economy unexpectedly contracted in the first quarter as COVID-19 ran rampant through the population for the first time and interest rates rose in response to soaring inflation.
The latest figures correlate with the economy’s disruption in the first three months of the year, when COVID-19 swept the country for the first time. That left many industries short of staff and customers as people isolated or worked from home. The slowdown is unlikely to deter the Reserve Bank from further increasing borrowing costs to tackle inflation, which may exceed 7 per cent this quarter. Most economists predict growth will rebound, though with house prices falling, and global uncertainty elevated, some say the risk of a recession in 2023 is rising.
The New Zealand dollar reversed initial losses of as much as 0.4 per cent after the data and was trading at 62.91 US cents in Wellington. Bond yields and swap rates fell, with the yield on two-year government debt extending its decline to 17 basis points.Expectations for quarterly GDP had varied widely. Three of New Zealand’s biggest banks tipped zero growth, while the Reserve Bank forecast a 0.7 per cent expansion. Only one of 18 surveyed economists called a contraction.
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