Pop quiz: Which developed country took the biggest GDP hit last year?

Answer: New Zealand.

The $60B sugar rush

Remember Covid? NZ’s response was like shot-gunning Red Bull – quick energy boost, followed by one hell of a crash:

  • The government dropped $60B in stimulus
  • Including $12B in wage subsidies
  • Business profits? All-time highs during lockdowns (you read that right)

As Simplicity’s chief economist Shamubeel Eaqub put it: “We have never had more profitable businesses than we did during the lockdowns.”

Wild times indeed.

The hangover

But here’s where things get chewy for property investors:

  1. The economy’s still napping: GDP shrunk 1% in the last six months of 2024
  2. Unemployment’s up: 5.1% (that’s 156,000 people without jobs)
  3. Government debt: Now up to $175B (42% of GDP)
  4. Immigration fail: More immigrants did not boost the overall standard of living

Why property investors should care

  • Tenant pool changes: More unemployment = changing rental market dynamics
  • Government spending: That $175B debt means less government spending
  • Overall vibe: Housing is in a downturn, constructions in a slump, and people are feeling poorer

 The Reserve Bank’s tough love

Picture the Reserve Bank as that strict parent who grounds you “for your own good.” They engineered a recession to control inflation. Per Eaqub: “These guys are sadistic. They’re like ‘we’re going to crush this economy; it’s the only way we know how to tackle inflation.'”

But wait, there’s hope!

The smart money’s watching these positive signals:

  1. Interest rates are dropping – though the pace will slow. The OCR now sits at 3.75% and is unlikely to go much lower.
  2. The job market is stabilising, per business confidence surveys from ANZ and NZIER
  3. Monthly economic data is showing signs of life, with growth expected to resume in the current quarter, driven by lower borrowing costs and increased household spending
  4. Government has launched a ‘growth’ drive

What’s next for property investors?

Westpac’s chief economist Kelly Eckhold isn’t predicting “stellar growth,” but here’s what’s cooking:

  • Interest rates: Coming down, but don’t expect pre-Covid levels
  • Government spending: Staying tight (sorry, infrastructure fans)
  • Economic recovery: Think slow and steady, not “rockstar”. Also bear in mind US President Donald Trump’s tariffs and China’s weak economy

2024 was like a post-party cleanup – messy, painful, but necessary. While we’re technically in recession, the foundations for recovery are being laid.

Keep an eye on interest rate cuts. They’re your friend if you’re looking to expand your portfolio, but don’t expect the wild west of 2020-2021 to return anytime soon.

P.S. If anyone asks why NZ got hit harder than most, just remember: We partied harder during Covid (economically speaking), and now we’re paying the piper.

Call 0800 GOODWINS to dive deeper into how these economic shifts affect your property strategy.