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Source: Trend Analysis Network

Trend Analysis indicates that the New Zealand economy is cooling more rapidly than anticipated, with longer recession and entrenched inflationary pressures expected through 2023.
The OECD projected GDP growth for New Zealand in 2023 is 1%, behind Australia’s 1.5% growth, Canada’s 1.8%, UK’s 1.6% and the United States projected GDP growth of 2.5%.
Moreover, as the New Zealand economy has contracted over the past two quarters, further government interventions with regard to Banking, increased Taxation on specific sectors, and growth for non-frontline staffing may combine to further entrench inflation and extend the recession into 2024.
The unexpected early contraction of the GDP in March 2023, combined with ongoing negative sentiment related to Interest rates, may be indicators of a more substantive economic decay than anticipated.
New Zealand may experience further economic declines in the next quarterly cycle based on trends gleaned from the OECD New Zealand Projection Data and the Reserve Bank’s Gross Domestic Product (M5) statistics.
Trend analysis indicates that for the final two quarters of 2023, further declines may be expected primarily resulting from government policies.
GOVERNMENT POLICIES AND INFLATION
Review of the last four quarters GDP statistics and historical inflation data, indicates an unexpected correlation between inflationary pressures and law changes related to Petrol and vehicle taxes, taxes associated with farm production and land allocation, and business operating cost increases.
Some of these legislation were passed under urgency during the November 2022 motion and are only beginning to impact the overall economy.
Trends show that government policies may be impacting economic growth drivers, as these new legislations begin to integrate into the macro-economic environment.
Government interventions may have had inflationary results within the macro-economy, including:
1.Changes to tax incentives for landlords.
2.Changes to tax laws around Petrol including the 2018, 2019, and 2020 fuel tax increases as well as regional fuel tax for regions such as Auckland. 
3.Changes to government staffing, with non-frontline staffing increases over the past six quarters across ministries.
4.Expanding costs related to the establishment of new central government authorities.
Each of these centralisation and interventional changes implemented in an inflationary cycle may have an add-on impact to the degrading economy.
HISTORICAL TRENDS
In 2004, monetary policy was focused on higher than anticipated inflation. Very similar to the current conditions, the vigorous monetary and government interventionist policies had an abrupt impact on overall economy.
By 2007, New Zealand economy saw a marked drop in all housing development across regions, while also seeing decay in the labour market and a substantive decline in overall economic growth.
The monetary and government policies had caused a more rapid cooling of the economy than originally anticipated.
Trend analysis shows a similar inflationary cycle currently developing in New Zealand.
Analogous to the 2004-2007 cycle, the economy is missing critical growth drivers including:-Increased incentives for businesses operating under inflationary pressure.-Increased funding for infrastructure development, which has a protective impact from inflation.-Increased immigration to inject capital inflow and increased skilled employees.-Reinstatement of tax deductions for critical sectors including the supply chain sector.
Without several of these drivers, trends show that the economy has limited fuel for growth or inflationary controls.
If further government interventional policies are enacted, or if the existing policies continue to expand further, New Zealand will see entrenched inflation for Q3, Q4 and Q1, primarily driven by government policy rather than OCR / monetary policy.
Moreover, trend analysis from the cycles following COVID-19 lockdown show larger than anticipated declines in discretionary expenditures, further exacerbating the recession of 2023.
Cursory trends show that ongoing and continued decline in the economic growth drivers have eroded the overall New Zealand economy, and its resilience against long term recession and major global upheaval or natural phenomenon.
Furthermore, as Bloomberg has already noted (15 March 2023 article), New Zealand credit grade may come under pressure and see an adjustment from on S&P Global Rating, having an even further impact on New Zealand monetary stability.
Other releases:Trend Analysis: Government Erroneous Interventions Into Banking Law

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