"Growth this quarter is being driven by strong domestic and export demand," SNZ national accounts senior manager Gary Dunnet said.
"Household spending was up 1.9 percent, with Kiwis spending more on going away, eating out, and furnishing their houses," he said in a statement.
Watch: Economy Hub on NZ economic growth:
Strong international demand saw exports increase 4 per cent, with exports of goods posting its biggest quarterly increase in nearly 20 years.
This increase was driven by exports of dairy products, meat, and fruit. GDP per capita increased 0.5 percent this quarter, following a 0.3 percent increase in the March quarter, SNZ said.
"All up, annual growth is materially higher than the Reserve Bank believed at the August monetary policy statement," ASB Bank economists said in a commentary. "While all this very encouraging, we continue to expect further rate cuts as the lack of inflation remains the key focus for the Reserve Bank at this time," they said.
Construction grew 5 percent in the quarter, with both residential and commercial activity expanding to meet the level of work required. That spilled over into other sectors with the demand for building products helping drive a 0.8 percent expansion in manufacturing and the housing boom supporting 1.3 percent growth in rental, hiring and real estate services.
"Eleven of the 16 industries were up this quarter, with construction once again providing a boost to production," national senior accounts manager Gary Dunnet said in a statement.
The other arm to New Zealand's growth this year has been record levels of tourism and inbound migration, which helped lift retail trade and accommodation services activity 1.9 percent in the quarter.
On an expenditure measure, GDP rose 1.2 percent in the quarter, driven by a 1.9 percent increase in household spending, the biggest quarterly gain since June 2009. GDP expenditure was up 3.3 percent from the same quarter last year, led by a 10 percent gain in residential building investment.
Gross fixed capital formation rose 3.1 percent in the quarter, and business investment, which excludes residential property, rose 1.7 percent.
On a per-capita basis, GDP rose 0.5 percent in the quarter, matching the period's population growth, and was up 0.7 percent on an annual basis.
Real national disposable income per capita, which measures the purchasing power of the nation's disposable income, shrank 0.1 percent as the terms of trade declined in the quarter, and was up 0.5 percent in the year.
On a production measure, primary industries were back in expansionary territory as agriculture, forestry and fishing grew 1.4 percent, offsetting a 2.5 percent contraction in mining. The pick-up in agriculture was due to increases in dairy production and horticulture, with global dairy prices recovering last year's slump and kiwifruit exports at a record.
The annual average GDP growth of 2.8 percent was in line with expectations.
with BusinessDesk
