NZ and Australia entering recession?

New Zealand's economy contracted by 0.2% quarter-on-quarter in the three months to June 2024, setting the stage for a technical recession as Q3 GDP is expected to decline further by another 0.2%. New Zealand has recorded the steepest per capita GDP decline among Anglosphere nations over the past year.

Across the Tasman, Australia is also teetering on the edge of recession. High interest rates are straining household budgets. The Reserve Bank of Australia (RBA) last week left rates unchanged at 4.35% for the ninth consecutive meeting. After which, the AUD/NZD cross attracted fresh buyers, crossing the 1.1000 psychological mark. So far, the 50% retracement (Nov high- Dec Low) has kept the pair’s upwards momentum in check.

While a rate cut by February seems increasingly likely, the RBA faces the challenge of navigating strong labor markets and demand, both propped up by record government spending, now accounting for 27.5% of the nation’s total economic output.