“Higher spending by international visitors led to increased activity in tourism-related industries such as accommodation, restaurants and bars, transport and vehicle hiring,” economic growth spokesperson Katrina Dewbery said.
The primary sector also delivered a boost off the back of strong production and good export prices for dairy and meat.
The largest falls were in construction, information media and telecommunications.
The lift in growth was stronger than most economists expected – with forecasts ranging between 0.2% and 0.5%.
GDP fell 0.5% over the year ended December 2024 compared with the year ended December 2023.
Construction fell 3.1% in the December 2024 quarter and has been declining since the March 2024 quarter.
“The fall in information media and telecommunications was driven by decreases in telecommunications and internet services, and broadcasting and internet publishing services,” Dewbery said.
“We’d call this a genuine upside surprise, in the sense that the growth was driven more by real activity and less by the seasonal issues that we identified in our preview,” Westpac’s Gordon said.
“The December quarter result was ahead of our forecast of +0.5%, which in turn was at the higher end of the range of market forecasts (median +0.4%).”
Kiwibank chief economist Jarrod Kerr said New Zealand was crawling out of recession.
“After some painful falls in activity over the second half of last year, the Kiwi economy ended 2024 on a better note.”
Kerr said the 0.7% rise was above its 0.3% forecast and was a “slightly positive surprise”.
But he said over the year it was still sombre reading.
“Compared to December 2023, the economy is still 1.1% smaller. And annually, output on a per person basis remains in decline having fallen a 2.2% over the year, last quarter it was down 3% over the year.”
Finance Minister Nicola Willis welcomed the confirmation the economy had turned a corner.
“We know many families and businesses are still suffering the after-effects of high inflation and interest rates, but today’s data confirms that New Zealanders can look forward to a better future,” Willis said.
“A growing economy means more opportunities, more jobs, higher incomes and, ultimately, better health, education and other public services.”
She said New Zealand still had a way to go to where the Government wanted it to be “... but with economic forecasters predicting further growth in the quarters ahead things are looking up”.
ASB economist Wesley Tanuvasa added a note of caution.
“The underlying economic momentum is a bit faster than we expected, but we remain a bit underwhelmed by the results to date in high-frequency data for [the first quarter of] 2025,” he said.
“We are also less convinced the [fourth quarter] drivers of growth can maintain their pace in 2025 given the broader global headwinds.”
That meant today’s release was unlikely to shift the interest rate track for the RBNZ, he said.
“Beyond 25 basis point cuts in April and May, the increasing skew of downside risks to the medium-term inflation outlook could see the RBNZ continue with OCR cuts.”
Earlier
It’s not going to be flash, but economists are forecasting that new data will show the New Zealand economy returned to growth in the last quarter of 2024.
ANZ is picking the economy grew 0.4% for the quarter.
“The economy is climbing out of a deep hole,” ANZ economist Henry Russell said.
He was expecting to see “modest growth” coming off the back of the deep recession – a cumulative decline of 2.1% over the preceding six-month period.
That two-quarter recession was the weakest economic performance New Zealand had seen since 1991 – outside of the Covid disruption.
The data should “confirm a gradual recovery in the economy is under way”, he said.
Economists are picking a range between 0.3% and 0.5% for the quarter-on-quarter growth figure.
At the lower end at 0.3% – and in line with the Reserve Bank’s (RBNZ) forecast – ASB chief economist Nick Tuffley said the details would likely show uneven fortunes by sector.
There would be strength in the primary and exports, while goods-producing industries and investment activity continued to contract, he said.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up for his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here.
