"Are we there yet?" The question echoes from the back seat for the hundredth time as the family ute winds through another stretch of seemingly endless highway. Dad glances in the rearview mirror at restless faces and sighs. "I told you kids this would be a long trip." Another hour passes. "Are we there yet?" comes the chorus again. "Nearly there," Dad replies… though he's starting to wonder whether they're even on the right road anymore.
Let's be frank: No, we're not there yet.
New Zealand's RBNZ-engineered recession has indeed landed, but the promised green shoots of recovery remain frustratingly elusive; more mirage than reality. The economy is crawling out of a deep hole, but the journey is proving longer than anyone anticipated.
Just as Q1 GDP figures showed decent growth of around 0.8%, we appear to be sliding backwards again – crushing any premature optimism, like we saw from Finance Minister Nicola Willis.[i] March quarter data showing a jump might look encouraging… but March feels like ancient history when current indicators are flashing red.
The BNZ-BusinessNZ Performance of Services Index dropped 4.1 points to 44 in May, taking it back to June 2024 levels – precisely when the steep recession began.[ii] [iii] Given that services represent about two-thirds of New Zealand's GDP, this is alarming.
Meanwhile, the Performance of Manufacturing Index tumbled from 53.3 to 47.5, wiping out all gains made earlier this year.[iv]BNZ economists described the combined data as looking "nothing short of disastrous", warning that the data showed our economy has hit a brick wall in Q2.
This raises the uncomfortable question: was the March quarter jump genuine sustained growth, or merely a dead cat bounce?
The Two-Speed Economy Mirage
Export prices are up 17 percent in the March quarter (primarily driven by dairy price increases) creating what economists describe as a ‘two-tier’ or ‘two-speed’ economy.
The primary sector's strength has indeed pulled the country out of technical recession, but construction and retail (sectors more sensitive to interest rates and domestic demand) remain deeply subdued.
This agricultural boom comes with its own vulnerabilities. When recovery depends heavily on commodity prices and Chinese demand, we’re essentially building on quicksand.
Regional Bright Spots: Hawke's Bay
While the national picture remains challenging, Hawke's Bay appears surprisingly well-positioned.[v] The region's core sectors are demonstrating remarkable resilience, with horticulture and agriculture benefiting from strong prices and excellent crop yields.
More significantly, Hawke's Bay continues to benefit from substantial post-Cyclone Gabrielle fiscal stimulus. Infrastructure rebuilding projects are generating sustained employment, with insurance payouts and government disaster relief continuing to flow through the local economy. While other regions struggle with weak domestic demand, Hawke's Bay has a ready-made source of economic activity likely to sustain momentum well into 2026.
The Interest Rate Conundrum
The RBNZ has cut the Official Cash Rate six times since August 2024, from 5.5% to 3.25%. Yet the transmission mechanism appears broken.[vi][vii]
Some economists believe rates need to fall further to 2.5% to genuinely stimulate recovery. Imagine you're a business owner facing falling sales and a shrinking pipeline… Even with low interest rates, would you rush to the bank for a big loan? Not likely – and that's precisely the problem.
There is a persistent confidence deficit. Consumer sentiment remains weak despite the RBNZ's aggressive easing, suggesting psychological factors are now more important than financial ones.
This creates its own negative feedback loop. Cautious consumers delay purchases, reducing business revenues, leading to job losses and further caution.
The Housing Market Stagnation
New Zealand's wealth effect traditionally runs through the housing market – but even here, the recovery is proving disappointing. Both ANZ and Kiwibank have revised down their house price forecasts, with Kiwibank’s Mary-Jo Vergara noting that while the market is starting to show an uplift in the last few months, it's been “very small, not the trend we would have expected by now".[viii]
This matters enormously because so much of New Zealand's wealth was tied up in property that a weak housing market has been tough on the economy. It's a classic catch-22: lower prices help affordability but hurt the wealth effect that drives consumption.
The Employment Challenge
Unemployment is approaching its peak, which should theoretically be good news, but the labour market remains soft. Employment growth isn't expected to rebound until the end of this year.
The human cost cannot be understated. On a per capita basis, economic activity has shrunk by more than during the global financial crisis. This isn't just statistics – it's people's livelihoods, businesses closing, and dreams deferred.
Reality, Much Revised
Kiwibank has cut its growth forecast for this year from 1.4% to just 0.9%, acknowledging that recovery is taking a lot longer than expected. [ix] The timing couldn't be more embarrassing for those who called the recovery too early. Remember the confident predictions about "Survive to Thrive in 2025"? That’s aged like milk.
To answer the question directly: no, we're not there yet. New Zealand is indeed crawling out of recession, but as economists have put it: We may be crawling for a little longer.
The RBNZ's recession may have been engineered, but the recovery certainly hasn't been. It's proving messy, uneven, and frustratingly slow. For now, New Zealand remains in economic purgatory: no longer in recession but not yet in recovery.
Back in the ute, the kids have gone quiet. Dad checks the GPS again, but the arrival time keeps getting pushed back. "How much longer?" comes the weary question from the back seat. He wants to say "soon," but honestly? He's not even sure they're still heading in the right direction. All he can do is keep driving and hope the next turn finally reveals the destination they've been promised for so long.
[i] https://www.stuff.co.nz/nz-news/360729578/nicola-willis-celebrates-latest-gdp-result
[ii] chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.bnz.co.nz/assets/markets/research/BNZ-BusinessNZ-PSI-Release-May-2025.pdf?20349784b533940ffeff9a1948c91bfaf8470b25
[iii] https://www.interest.co.nz/economy/133776/services-sector-activity-drops-sharply-and-slumps-levels-last-seen-june-2024-start
[iv] https://businessnz.org.nz/pmi/uptick-in-expansion/
[v] https://www.nzherald.co.nz/the-country/news/nz-horticulture-exports-forecast-to-increase-19-driven-by-kiwifruit-boom/FGYGVR4BFJAZDH3ETCE7RJQIMM/
[vii] https://www.bloomberg.com/news/articles/2025-05-28/new-zealand-delivers-sixth-rate-cut-to-spur-economic-recovery?embedded-checkout=true
[viii] https://www.rnz.co.nz/news/business/564989/another-major-bank-lowers-house-price-expectations
[ix] https://www.rnz.co.nz/news/national/564129/recovery-taking-longer-than-expected-kiwibank-economists-say
Nick Stewart (Ngāi Tahu, Ngāti Huirapa, Ngāti Māmoe, Ngāti Waitaha) is a Financial Adviser and CEO at Stewart Group, a Hawke's Bay and Wellington based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, Wealth Management, Risk Insurance & KiwiSaver scheme solutions. Article no. 413.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
