Infometrics chief forecaster Gareth Kiernan.
Photo: RNZ / Rebekah Parsons-King
The global trade war is forecast to cut New Zealand’s economic growth by more than half from the end of the year.
Economic think tank Infometrics said annual GDP growth could fall 1.4 percentage points to 1 percent in 2026 from earlier growth forecasts of 2.4 percent.
“Most Kiwis will not be directly affected by American trade policy, but the implications of a global downturn are potentially wide-reaching outcomes for more tangible areas such as the New Zealand labour market and housing market,” Infometrics chief forecaster Gareth Kiernan said.
“The global volatility could not have come at a worse time, given that New Zealand was just starting to emerge from two years of flat or declining economic activity.”
He said exports were set to be negatively affected by the weaker global economy, flowing through into more caution around business investment and household spending as well.
“New Zealand’s growth in exports could slip towards zero over the next 18 months as international demand softens, and the purchasing power of overseas businesses and consumers is hit by higher costs due to tariffs.”
Kiernan said the on again, off again nature of the tariffs was creating a difficult environment for investment and hiring decisions.
“There is an incredibly high level of uncertainty around the global economy at the moment, with a mounting probability of a global recession due to the tariffs proposed by US President Trump,” he said.
“The blanket tariffs of 10 percent announced for all imports to the US, alongside the much higher tariffs imposed on China, are set to significantly slow economic growth in the world’s two largest economies.”
He said the lower exchange rate and potential for higher imported inflation could see annual inflation rise to 2.8 percent later this year.
“Faced with this weaker economic outlook, the balance of risks has tilted towards further interest rate cuts by the Reserve Bank.”
“As a result, we expect the bank to cut the official cash rate to 3 percent by July, but any further reductions will be dependent on expectations for lower, more favourable inflation outcomes.”
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