New Zealand’s economic confidence is doing an awkward dance

The economic vibes are… complicated. The economy technically crawled out of recession with a 0.7% GDP bump in Q4 2024, beating economists’ expectations of 0.3-0.5%. After eight straight quarters of decline, GDP per capita finally rose by 0.4%.

That’s nice, but not that great – the economy is still 1.1% smaller than it was in December 2023.

Confidence jitters

The ANZ-Roy Morgan Consumer Confidence index just dropped 4 points to 93.2 in March. ANZ’s report, aptly titled “A bit of a slog,” noted that while confidence is generally trending upward, “it’s fair to say it’s making hard work of it.” Translation? Kiwis aren’t exactly rushing to open their wallets.

Here’s what the people think:

  • A net 16% think it’s a bad time to buy major household items
  • Perceptions about personal finances plummeted 9 points to -21%
  • Only 16% expect to be better off this time next year, down 5 points
  • Economic outlook for the next 12 months? Down 4 points to -20%

One potential bright spot for property investors: House price inflation expectations ticked up slightly from 3.2% to 3.4%.

Employment expectations a bit bleak

The Westpac-McDermott Miller Employment Confidence Index hit its lowest level since September 2020, falling 3.3 points to 88.3 in Q1.

About 6 in 10 employees think jobs are currently hard to get. Private sector confidence dropped 4.7 points to 87.9 — a massive 20.8-point nosedive from last year.

Auckland handbrake

Not all regions are feeling equally gloomy. In fact, only 4 out of 11 regions recorded falling confidence — but one of those was Auckland, which basically drags down the national average because… it’s Auckland.

Farming regions like Waikato, Taranaki, and Southland are feeling a little more bullish thanks to record high farmgate milk prices ($10.30 per kilo of milk solids) and improving beef and lamb exports.

What next?

Interest rate watchers, mark your calendars for May 28 — the next OCR review. The Reserve Bank of New Zealand has already reduced the Official Cash Rate to 3.50% as of April 9, 2025. Economists anticipate further cuts, with Kiwibank’s Chief Economist, Jarrod Kerr, forecasting a reduction to a neutral rate of approximately 3.0% later this year.

Finance Minister Nicola Willis acknowledges families and businesses are “still suffering the after-effects of high inflation and interest rates” but sees light at the end of the tunnel with “economic forecasters predicting further growth in the quarters ahead.”

Mixed bag for property investors

For property investors, this mixed bag signals caution but not panic. Consumer confidence remains below the crucial 100-point threshold, but inflation expectations (now at 4.2%) suggest property will remain an inflation hedge.

The recovery is happening, just at a pace that would make a snail look sprightly. For now, the smart money is on patience and careful tenant selection.

Call 0800 GOODWINS to dive deeper into rental market projections or to discuss your portfolio.