Are We Beyond the Green Shoots Yet?

For much of the past year, “green shoots” signalled the first hints of recovery. As we round out winter 2025, the question is sharper: have we moved past seedlings to something sturdier? Short answer: we’ve inched forward — but we’re not in full bloom yet.

Growth is Back — But Still Patchy

New Zealand GDP rose 0.8% in the March 2025 quarter, after 0.5% in December 2024 — two consecutive quarterly gains. On an annual basis, however, growth was still down 1.1%, underscoring how uneven the recovery remains.

Inflation is within target: annual CPI sat at 2.7% in the year to June. Under the hood, non-tradables inflation has eased while tradables picked up slightly — consistent with an economy carrying spare capacity.

Business: Cautious Optimism

Business confidence lifted again in August, reaching its strongest level in months. Pricing and cost intentions have softened, and inflation expectations eased a little. It’s an improvement — but many firms still describe current domestic conditions as subdued.

On the policy front, the Reserve Bank has trimmed the Official Cash Rate to 3.0%, aiming to support activity in the face of global and local headwinds.

People: Still Feeling the Pinch

Households aren’t there yet. Consumer confidence slipped to its lowest point in nearly a year, with fewer New Zealanders seeing it as a good time to make major purchases. The labour market has softened too, with unemployment rising to 5.2% in the June quarter.

Housing sentiment remains fragile despite lower rates, with affordability issues and job insecurity keeping buyer demand subdued.

What Would Mark “Beyond the Shoots”?

To say the economy has genuinely turned a corner, we’d want to see:

• Year-on-year GDP back in positive territory for several consecutive quarters.

• Unemployment trending down with higher workforce participation.

• Rising consumer confidence and stronger household spending.

• Broader-based business investment across regions and sectors.

• Housing market stabilisation, especially for first-home buyers.

• Inflation anchored comfortably in the mid-range of the target band.

Verdict

We’re past the first sprouts — quarterly growth is positive and business sentiment is improving — but the roots aren’t deep yet. Households remain cautious and the labour market has slack to work through. Call it early growth, not full bloom.