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New Zealand’s economic challenges persist

New Zealand’s government outlined a soft economy with rising unemployment and a weaker balance sheet of modest tax relief but lowered new spending—facing much criticism for neglecting the country’s indigenous population.

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New Zealand’s government outlined a soft economy with rising unemployment and a weaker balance sheet of modest tax relief but lowered new spending—facing much criticism for neglecting the country’s indigenous population.

As the country just barely emerged from a recession in Q1 of this year, economists predict modest growth. GDP increased 0.1% in the first quarter, according to economists surveyed by Bloomberg News. 3 survey respondents from local banks forecast a contraction and ‘two tip zero’ growth.

“This budget won’t fix all of New Zealand’s economic challenges on its own and there is much more to do, but it does show what is possible with care and discipline,” said New Zealand Finance Minister Nicola Willis in her inaugural budget statement. “The budget, (which reduced new operating spending and covered large savings in housing, tertiary education, conservation and environment spending along with smaller cuts across many agencies), saw NZ$2.68 billion for roads, rail and public transport, and NZ$2.1 billion for law and order.

Yes, but: Recent data revisions to GDP estimates have seen estimates of labor productivity and potential output growth to turn downwards. This points to the potential GDP forecast to be 2% lower by 2026:

  • Weak near-term demand and record high net migration have seen the unemployment rate increase from a record low 3.2% at the start of 2022 to 4.3% in March 2024.
  • Unemployment in New Zealand is forecast to peak at 5.3% at the end of 2024.
  • With inflation pressure subsiding, interest rates are forecast to begin gradually easing from late 2024 quarter.

By the numbers: Customers in New Zealand have averaged 41 days beyond terms, with 67% of credit professionals saying payment delays have stayed the same, per the FCIB Credit and Collections Survey. The most common causes for payment delays are cash flow issues (33%), cultural norms and customs (33%) and other disputes (33%).

What FCIB Credit and Collections Survey respondents are saying:

  • “Use credit insurance if offering net terms.”
  • “It is important to know customer’s payment process to avoid misunderstandings or delays due to administrative issues.”
  • “Follow up with the customer’s procurement and finance department as many times as necessary.”
  • “Obtain financial statements on your customers and backstop sales with credit insurance.” 
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Kendall Payton, social media manager

Kendall Payton is a social media manager at NACM National. As a writer who covers all things in B2B trade credit, her eNews stories and Business Credit magazine articles are crafted to keep B2B credit professionals abreast of industry trends. When she’s not in writer mode, she’s hosting the Extra Credit podcast or leading NACM’s Credit Thought Leaders forum—a platform for credit leaders to network and discuss challenges and solutions. Though writing and podcasting have become her strong suits, Kendall loves to edit and create video content in her free time.

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