The latest GDP figures show New Zealand’s economy grew 0.8% in Q1 2025, outstripping predictions and reinforcing signs of a faster recovery, according to Statistics New Zealand data released on Thursday. The Reserve Bank of New Zealand (RBNZ ) now faces less urgency to cut rates further amid renewed economic momentum.
Quarterly Growth Exceeds Expectations
The 0.8% rise in GDP follows a revised 0.5% gain in the fourth quarter of 2024, previously reported as 0.7%. While modest, the continued expansion marks a turnaround from last year’s technical recession, which saw two consecutive quarters of economic contraction—New Zealand’s worst non-pandemic downturn since 1991.
“Gross domestic product (GDP) rose 0.8% in the March quarter from the previous three months,” Statistics New Zealand data showed on Thursday.
Reserve Bank Signals Possible Pause on Rate Cuts
The stronger-than-expected figures may lead the Reserve Bank to pause before making additional cuts to the official cash rate. Since August 2024, the RBNZ has already lowered the rate by 225 basis points, bringing it to 3.25%, and signalled in May that at least one more cut could be on the table this year, citing global trade tensions.
“With the economy regaining its footing sooner than expected after last year’s sharp downturn, we continue to expect that the RBNZ will take the opportunity to pause and assess the situation at its July official cash rate review,” said Michael Gordon, senior economist at Westpac.
Annual Data Continues to Reflect Contraction
Annual data still reflects the economy’s earlier struggles despite the quarter-on-quarter improvement. GDP was down 0.7% in the March quarter compared to the same period last year—a slightly better outcome than the 0.8% decline that had been forecast.
Services and Manufacturing Drive Growth
According to Statistics New Zealand, nine out of 16 industries recorded growth. Business services and manufacturing were the main drivers.
“At a more detailed industry level, nine of the 16 industries increased, with the largest rises in business services and manufacturing,” said Katrina Dewbery, spokesperson for economic growth at Statistics New Zealand.
The largest falls were seen in arts and recreation services, along with information, media, and telecommunications.
“The largest decreases were seen in arts and recreation services, and information, media, and telecommunications.”
The March quarter GDP increase did little to shift market sentiment. The New Zealand dollar held at $0.6028, with financial markets largely flat. Investors appeared to take a measured view amid broader economic uncertainties.