New Zealand’s Economy: Seven Reasons to be Cheerful
In the wake of Covid, weather events and inflation news about our economy has been grim, but here are seven compelling reasons to be optimistic, says Tony Alexander.
18 July 2023
It’s been a grim few years for the New Zealand economy. We’ve had the uncertainty and lockdowns of Covid, the chaos and destruction of numerous wild weather events, and now inflation that just won’t budge. Despite that, things are looking up mid-2023.
In fact, as economist Tony Alexander explains, there are at least seven reasons to be optimistic about the future.
1. Rapidly rising tourist numbers
In the year to April 2020 New Zealand had 3.35 million international visitors. In the following year, according to Tourism NZ data, we had just under 83,000. Tourism, accommodation and the hospitality industries struggled to stay afloat and the sector’s income plummeted.
The most recent figures show tourists are coming back: we had 2.18 million international visitors in the year to March.
2. Strong labour market
Need work? You’re in the right place here in NZ. Our strong labour market is a positive sign for the future of the NZ economy. According to Alexander: “There are high levels of job security and the ability to secure extra hours of work or part-time work for those needing extra cash.”
3. Foreign students return
In August 2022, Education NZ reporting showed we had 12,791 people with valid student visas in NZ, less than a sixth of the pre-pandemic number. The direct value of international education to the economy fell $2.9 billion during this time.
Recent evidence shows international students are coming back. In March this year there were 33,438 students with valid visas.
4. House price falls ending
Economists have called it … the house price slump is over. In fact, BNZ chief economist Mike Jones says prices may soon start to rise.
In a recent blog he says “… we’re now sticking a fork in the correction and calling it as roughly done at levels around 16 per cent below the peak.
“We now see house price growth resuming over the second half of this year, but only at modest rates of around 1-1.5 per cent per quarter.”
House price rises should help increase household wealth, which will buoy our economy.
5. Underlying growth in key sectors
NZ is now officially in recession, but despite that underlying growth in sectors like infrastructure, space, games, aged care and healthcare gives us reason for optimism, according to Alexander.
6. A low NZ dollar that’s likely to go lower
On the back of aggressive interest rate hikes the NZ dollar is low and likely to go lower. This is great news for exporters who may invest more and take on more employees as demand for their (now cheaper) goods increases.
7. Strong net migration inflows
People are the engine of any economy and they’re coming into New Zealand fast. During the year to March 2022 we lost 19,300 people, but during the following year Stats NZ expects an annual net gain of 65,400.
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