Tentative rebound: RBNZ governor Christian Hawkesby speaks to the media amid the report’s release in Wellington. The country’s economy is slowly recovering from a deep recession just as Trump’s tariffs cloud the outlook for global growth. — Reuters
WELLINGTON: New Zealand’s jobless rate unexpectedly held steady in the first quarter (1Q25) as fewer people sought work in a sluggish economy.
Unemployment was unchanged from 4Q24 at 5.1%, Statistics New Zealand said yesterday in Wellington.
Economists and the Reserve Bank of New Zealand (RBNZ) expected an increase to 5.3%. Employment rose 0.1% from the previous three months, matching estimates, while wage inflation slowed.
New Zealand’s economy is slowly recovering from a deep recession last year just as US President Donald Trump’s tariffs cloud the outlook for global growth.
Business confidence has dipped and hiring intentions have retreated amid the uncertainty, dashing hopes for a strong domestic expansion and job creation.
“We look to be close to the cyclical peak in unemployment but will need to see the tentative New Zealand economic recovery become more established so that firms have the rationale and confidence to increase hiring,” said Mark Smith, senior economist at ASB Bank in Auckland.
“Further monetary easing looks appropriate to support the labour market.”
The New Zealand dollar was little changed after the report, buying 60.12 US cents in Wellington.
This month’s budget will show slower economic growth than previously expected both this year and next, Finance Minister Nicola Willis said last week.
Expectations of a tepid recovery and signs of slowing wage inflation are fanning bets the RBNZ will cut interest rates further than it signalled in February.
The RBNZ has lowered the official cash rate (OCR) by 200 basis points to 3.5% since it began an easing cycle in August and investors expect the benchmark will drop to 2.75% by the end of the year, according to swaps data.
Policymakers next review the OCR on May 28.
The labour force participation rate, which measures how many of the working age population are actively seeking employment, dropped to 70.8%, the lowest since mid 2021.
Employment fell 0.7% from the same quarter a year earlier.
The report also showed pressure on wages eased as the labour market weakened, with annual wage inflation slowing for an eighth straight quarter.
Meanwhile, New Zealand’s central bank said sweeping US tariffs are likely to curb global economic growth and have prompted investors to bet on deeper interest rate cuts.
“Trade restrictions have led to higher financial market volatility, and are likely to lead to a slowdown in major economies,” the RBNZ said in its semi-annual Financial Stability Report published in Wellington.
“Recent US trade announcements have contributed to lower policy rate expectations, as financial market participants anticipate that lower economic activity will prompt further monetary policy easing.”
The RBNZ said the trade turmoil has increased the downside risks to New Zealand’s economic growth, adding to signs it could cut interest rates further.
It has already reduced the OCR by 200 basis points to 3.5% and investors are betting it will lower the benchmark to 2.75% by the end of the year.
“We are currently assessing what these trade disruptions mean for our central projection of the New Zealand economy and inflation,” the central bank said. Its next policy decision is on May 28.
The RBNZ said US tariffs on imports from China could materially impact Chinese economic growth, and noted that China is New Zealand’s largest trading partner.
“Weaker growth in China would also affect economic activity in our other key trading partners, for example Australia and South-East Asia,” it said.
The RBNZ said that a further weakening in the domestic economy due to tariffs could materially affect indebted households and businesses, posing a key risk to financial stability.
Still, it said banks remain well-placed to deal with potential losses from the escalation in trade restrictions. — Bloomberg
