Exports lift and inflation steadies despite GDP contraction
New Zealand’s economy contracted 0.9% in the June 2025 quarter, reversing a 0.9% rise in March, Stats NZ reported.
Manufacturing (-3.5%) and construction (-1.8%) were the biggest drags.
Over the year to June, GDP fell 1.1%, with GDP per capita down 2.1%. The unemployment rate edged up to 5.2% from 5.1% in March and 4.7% a year earlier.
“A technical recession is defined as two consecutive quarters of decline in GDP,” said Jason Attewell (pictured), Stats NZ general manager and macroeconomic spokesperson, in a media release.
“New Zealand’s small and open economy can fluctuate from quarter to quarter, so other indicators also matter. The unemployment rate in the June 2025 quarter was 5.2%, and this has been rising for the last three-and-a-half years.”
Current account deficit narrows
The current account deficit shrank to $3.4 billion in June, down from $4.1bn in March and the smallest since mid-2021. Annually, the deficit fell to $16bn (3.7% of GDP) from $18.3bn in March (4.2%).
Exports rose 9.9% to $28.9b over the year, while imports gained 3.2% to $27.6b.
“This quarter’s smaller current account deficit was due to a $1bn narrowing of the primary income deficit,” Attewell said. “New Zealand investors earned more from their investments abroad this quarter, including pensions and the overseas subsidiaries of New Zealand companies.”
Inflation pressure led by local rates
Annual consumer inflation lifted to 2.7% from 2.5% in March, staying within the Reserve Bank’s 1-3% target band. Local authority rates (+12.2%) and rents (+3.2%) were the key upward drivers, offset partly by cheaper petrol (-8%).
Business input prices rose 4.5% and output prices 4.2%, both outpacing consumer inflation.
“Since 2017, local authority rates have increased at twice the rate of headline CPI. Rates make up about 3 percent of total CPI by weight,” Attewell said.
Gender pay gap hits record low
Stats NZ also highlighted a historic narrowing of the gender pay gap, which fell to 5.2% from 8.2% a year earlier – the lowest since records began in 1998.
Median hourly earnings climbed 4.3% to $35.00, with women’s wages rising 5.2% to $33.76 and men’s up 1.9% to $35.62.
“The reduction in the gender pay gap was driven by larger increases in median hourly earnings from wages and salaries for women than for men,” Attewell said.
Implications for mortgage advisers
For mortgage advisers, the data highlights a mixed picture: while softer GDP and rising unemployment point to household stress, a smaller current account deficit and moderating inflation signal easing pressures ahead. Falling rates could support serviceability even as job security remains fragile.
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