New Zealand’s economy has fallen back for the second quarter in a row and the country is now officially in recession. This coincides with public sector cutbacks and decreasing business confidence.
New Zealand has officially gone into recession, and the new government is tightening the purse strings.
Elected last November, the three-party coalition government, which campaigned on curbing excessive expenditure, wasted no time cutting back on the public service and other spending.
Significant Job Losses Expected
The government, under Finance Minister Nicola Willis, is aiming to reduce annual public service spending by $1.5 billion and has instructed all departments to identify savings options, with some agencies asked to make cuts of either 6.5 or 7.5 percent
One government department, the Ministry of Health, is forecast to lose up to 25% of its staff, and the total redundancy payments to be made to public servants losing their jobs are expected to exceed $100 million.
Business Confidence Dropping
The ANZ Business Outlook Index in New Zealand fell to 34.7 in February 2024 from January's 9-1/2-year high of 36.6, indicating a patchy economy with both positive and challenging aspects
This data suggests that while there are positive signs in certain sectors, there are still areas of concern, highlighting the complexity of the current economic situation in New Zealand, and the impact on business confidence. Some local marketing consultants are now offering free training to assist small businesses with marketing their services in response to these changing conditions.
Capital City Braces For The Worst
New Zealand's capital city, ,Wellington is expected to bear the brunt of public sector cuts, with significant job losses impacting the capital city.
The slashing of jobs at government agencies, including the Ministry for Primary Industries and the Health Ministry planning to cut more than 400 roles, has raised concerns about the broader economic implications for Wellington
with the government in April, highlighting the potential knock-on effects on the local economy as hundreds of people lose their jobs, impacting their ability to spend and contribute to the city's economic activity
Economist Shamubeel Eaqub has expressed that the public sector cuts in Wellington are expected to be more substantial than previous reductions, which could have significant repercussions for the city's economy and employment landscape.
The Wellington Chamber of Commerce chief executive also noted that individuals affected by the cuts, who possess valuable skills, may consider leaving the capital, further emphasizing the potential impact on Wellington's workforce and economy.
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