• New Zealand’s economic recovery from the pandemic has been one of the fastest in the world, owing to the country’s swift containment of the virus.
• Economic indicators like electronic card transactions, unemployment rates and housing consent numbers have all sprung out as the bright spots for NZ.
• As the nation moves to the next stage of economic recovery, it seems essential to boost the skill set of the population and focus on infrastructural development.
New Zealand (NZ) has been one of the fastest countries to recover from the aftermath of the pandemic, be it through curtailment of the virus or favourable policy measures. The country’s GDP growth of 1.6 per cent recorded during the first quarter of 2021 overshot the estimates for the period, exhibiting a robust growth trajectory.
At a time when the country is emerging out of the pandemic better than most of the advanced economies, it becomes crucial to examine the key indicators that have spurred its economy during strenuous times.
Experts remain positive about the future growth of New Zealand, with some expecting its economy to retreat to pre-pandemic levels soon. The country’s impressive pace of economic growth has also triggered a slowdown in the ongoing fiscal and monetary stimulus provided by the government and central bank. The speculations around the central bank tightening its monetary policy earlier than expected provide further proof that the country is staying ahead of the game.
Having said that, one cannot neglect that the nation’s economy is facing roadblocks in the form of a slow vaccine rollout and high dependency on immigration to stimulate economic growth. In fact, the nation has so far relied on increased consumer spending to strengthen its economic recovery. However, the sustenance of long-term growth demands a durable economic structure, where enhanced skills in the workforce and developed infrastructure can form the foundation stone.
Despite some challenges, various green shoots are gleaming in the country’s economy, giving evidence of its strong revival from the virus crisis. Let us quickly take a look at these bright spots:
Electronic retail sales going from strength to strength
Consumers in NZ have increasingly warmed up to online retailing and have developed a strong liking for the same. July’s electronic card transactions data is a testament to Kiwis’ growing taste for online retail. The recently released figures from Statistics NZ reveal that the electronic spending in retail industries shot up by NZ$39 million or 0.6 per cent in July, compared to June.
Within the retail industry, spending on consumables was up by 0.7 per cent, which translated into a massive increase of NZ$15 million. Additionally, consumers chose to stock up their pantries and boost their apparel stock extensively by spending an additional NZ$12 million on clothing, shoes, jewellery and watches in July.
It is worth noting that the increased electronic sales have exhibited a seasonal pattern, with consumers increasing clothing consumption around July. Besides, this month’s increase came riding on the back of lower spending seen last month.
Jobless rate continues to plummet
The continued falls in the unemployment rate have been a sigh of relief for New Zealanders, closely followed by a decline in the underutilisation rate. Statistics NZ recently reported that the seasonally adjusted unemployment and underutilisation rates plunged to 4 per cent and 10.5 per cent, respectively in the June 2021 quarter.
Declining unemployment figures have been supported by increased job vacancies for Kiwis as well as reduced numbers of jobless benefit recipients. The number of unemployed people fell drastically by 12.4 per cent in the June quarter, marking the nation’s largest quarterly drop in unemployment since 1986.
Notably, the underutilisation rate for NZ has remained in a deadlock since the financial crisis of 2008. However, the June quarter was one of the most significant periods for this indicator, given its sharp fall. Though the current figures provide a positive indication for the future of the labour market, the government’s focus should now gradually shift on building resilience within the domestic setup without high reliance on immigrants.
Record-breaking increase in new home consents
Home consents are a constituent of total building consents that depict the overall change in the new dwellings. The latest data from Statistics NZ show that an unprecedented 44,299 new homes were consented during the year ended June 2021. Meanwhile, June marked the fourth consecutive month where home consents inclined.
The record figure of 44,299 new homes was closely followed by the previous peak of 43,466 seen in May 2021 year. These new homes were majorly comprised of multi-unit residential spaces like townhalls, units and apartments, with the recent growth most widely seen in Auckland. It is important to note that the number of new homes consented can greatly vary by the timing of large capacity housing units such as apartment buildings.
These statistics reflect the strength of the housing market in the NZ economy, which has been largely impressing investors on the upside since the onset of the pandemic.
All in all, the promising economic outlook for New Zealand has been strongly backed by strong employment rates and increased consumer participation in the retail and housing spheres. However, the current scenario demands a gradual shift of focus from economic recovery towards sustained economic growth from this exceedingly outperforming nation.