The Economist noted that an overall strong year for economies, with global GDP up 3.2%, hid differences between countries.
Infometrics chief forecaster Gareth Kiernan said it looked as though it was because of New Zealand’s hangover from its “Covid spend-up party”.
“I suspect if you looked at some of our metrics in previous years, we would have been up near the top of the list because we had been boosting the economy so much with very stimulatory monetary and fiscal policy.
“There’s likely to be some improvement in some of the metrics they’ve used in 2025 – GDP, inflation, and to a lesser extent unemployment – but it’s going to be a slow road towards improvement for the fiscal position, in particular, reflecting some of the structural issues such as weak productivity growth that continue to hamper our medium-term progress.”
Mary Jo Vergara, an economist at Kiwibank, said she was not surprised to see New Zealand fall behind Australia and the United States.
“The Reserve Bank was among the most aggressive central banks in the world to raise interest rates, and our economy has faltered because of it.
“The US, by contrast, has orchestrated and achieved a soft landing. Here, per capita output has been in decline since December 2022 and firms are now downsizing. We’re expecting unemployment to continue climbing in 2025, whereas jobs growth in Australia, while slowing, remains positive.
“The outlook for the Kiwi economy, however, is improving, particularly from the second half of 2025 onwards. Just as the Reserve Bank was the most aggressive on the way up, they’re shaping up to be aggressive on the way down. They’ve delivered 125bps of easing, and we expect another 125bp to come. The economy needs it, especially if we want to be higher on that ranking.”
Independent economist Cameron Bagrie said it was a combination of high inflation having required a heavy-handed monetary policy response, “awful” productivity, and the economy falling from artificial highs in 2021 and 2022.
Massey University professor Faruk Balli said he was not surprised by the ranking.
“New Zealand’s not growing fast and recent Reserve Bank policies and the post-Covid era make it harder to recover.”
He said New Zealand was No 3 in the world in terms of GDP per capita in the 1950s and was now 37th.
“This simply states New Zealand is growing significantly slower compared to other OECD countries in the last 60 years. New Zealand is an island country, mostly isolated, and we can not compare it with other countries in Europe [where it is] easy to access capital; easy to trade. We can also see same issue for Australia.”
Australia was ranked 21st.
The Economist said the global economy had new challenges in 2025.
Nearly half of the world’s population was in countries that had elections this year and many had new leaders who could be described as unpredictable.
“Trade is under threat, government debt is swelling and stockmarkets have little room for error.”