MNI BRIEF: NZ Govt Forecasts Recession, CPI Miss Until 2024

The New Zealand government has forecast a recession for the 2023/2024 fiscal year and expects the Consumer Price Index not to return to the Reserve Bank of New Zealand's inflation target until late 2024.

The NZ Treasury's Half Year Economic and Fiscal Update forecast growth to contract over June, September and December quarters next year, delivering a contraction in growth of 0.3% by June 2024. The Reserve Bank of New Zealand Monetary Policy Statement forecast four consecutive quarters of contracting growth starting in the June quarter. (See MNI RBNZ WATCH: Another 125bp Coming; Brace For Recession)

The economy is expected to struggle with elevated inflation for another couple of years. The CPI is forecast to return to the top end of the RBNZ's 1-3% inflation band by the December quarter of 2024. The RBNZ forecasts an easing in inflation from an expected peak of 7.5% this quarter and next to 2.9% in the September quarter of 2024. Net debt is forecast to peak at 41.8% of GDP in 2023/2024 compared to its May forecast of 41.2%. An operating surplus of NZD1.7 billion is forecast for 2024/2025.