Repairing damage from recent severe weather events is a key focus…
Severe weather in the North Island at the start of 2023 caused widespread disruption and damage to people’s lives and properties, the scale of which will be felt across parts of the economy for some time. In the shorter term, the economic impacts will be concentrated on primary industries that suffered significant loss of crops and capital stock. Consumers are facing higher prices for affected products – notably fresh produce. Over time, the impacts will largely come through increased demand to rebuild infrastructure, homes and businesses. The Government’s prudent fiscal management has ensured there is fiscal headroom to respond to shocks such as these, as well as future shocks.
…and the Treasury no longer forecasts a mild recession in 2023
Figure 4 – Gross domestic product
Sources: Stats NZ, the Treasury
Economic activity associated with the recovery and rebuild from the North Island weather events and the continued recovery of international tourism means the Treasury no longer forecasts a recession in 2023. The economic forecasts include around $9 billion of cyclone-related rebuild and recovery investment activity over the forecast period (with a further $1 billion occurring beyond the forecast period) across both the public and private sectors. Approximately $5 billion of this relates to local and central government infrastructure.
There is, however, particular uncertainty regarding March 2023 quarter activity and it would not take much movement to see another negative quarter follow the weaker-than-expected December 2022 GDP result.