Key Facts

  • The Organisation for Economic Co-operation and Development (OECD) advises the Reserve Bank to continue implementing tight monetary policy throughout 2024.
  • According to the OECD, the New Zealand economy will only see moderate growth for the next couple of years and tax cuts may potentially exacerbate issues.
  • Economic growth is predicted to slow down to 1.3% in 2024 and then increase slightly to 1.9% by 2025.
  • The OECD reports that the increase in migration this year is filling labor gaps and supporting overall growth, but is also increasing the demand for housing, leading to potential inflation pressures.
  • While high interest rates are affecting consumer spending and housing investment, lower global growth is limiting inbound tourism and reducing commodity export prices.
  • The OECD suggests implementing financial and structural policies to counter inflation and balance out the economy, instead of increasing demand through tax cuts or non-targeted subsidies.

Article Summary

The Organisation for Economic Co-operation and Development (OECD) has recommended that the Reserve Bank of New Zealand sustains its strict monetary policy throughout 2024. The OECD’s latest economic outlook closely aligns with the Reserve Bank’s recent monetary policy statement, indicating that the New Zealand economy is projected to experience only modest growth for the next few years.

The OECD predicts that the growth will taper off to 1.3% next year, and only moderately recover to 1.9% by 2025. This slowed growth is attributed to a combination of factors including higher interest rates affecting consumer expenditure and housing investment, and reduced global growth negatively impacting inbound tourism and commodity export prices.

Furthermore, the OECD points out that while the surge in immigration this year has helped fill labor shortfalls and stimulated overall growth, it has also led to a heightened demand for housing and other services, thereby applying pressure on inflation. Despite these factors, the OECD stresses that the Reserve Bank must uphold a “restrictive” economic policy due to the current state of the economy and inflation. The international organization also warns against implementing tax cuts as a means to even out imbalances but rather suggests that effective financial and structural policies should be pursued.

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