BNR – The New Zealand economy has entered a slump after the country’s central bank increased interest rates to an all-time high of 14 years. Official estimates suggest that its GDP decreased by 0.1% in the first three months of the year.
Following a 0.7% drop in the preceding quarter, the economy is now in a “technical recession.” Since October 2021, the Reserve Bank of New Zealand (RBNZ) has dramatically increased the cost of borrowing.
New Zealand was among the first countries to raise interest rates in the aftermath of the epidemic, outpacing the US Federal Reserve. The RBNZ raised its main interest rate to 5.5% this past month.
New Zealand Population Faces Financial Strain
New Zealanders, who were already dealing with rising costs, are now suffering the effects of increased interest rates. This occurs as financing costs and the expenses of other debts increase.
“Interest rates are crippling,” said David Jordan, an Auckland-based web developer.
“I have seen many job losses in my industry as start-ups try to save money,” he continued. “[T]hough consultancies working with big global firms seem to be faring better.”
Global central banks raised the cost of borrowing. The rise comes as banks strive to contain price increases caused by economies opening up following the Covid restrictions.
Inflation was also pushed up by the increased cost of all goods from gas to food as a result of the Ukraine war.
Cyclones Hale and Gabrielle, as well as teacher strikes, damaged New Zealand’s economy in the first quarter of 2023. A technical recession is described as an economy contracting for three consecutive months, or quarters.
Previously, the RBNZ indicated that it had no intentions for additional rate rises. The contraction adds to views that the central bank would not raise interest rates again in the near future.
