IMF Staff Country Reports

The 2024 Article IV Consultation discusses that New Zealand’s economic activity has slowed following monetary policy tightening and a decline in investment. Growth is expected to remain slow at 1 percent y/y in 2024 before picking up in 2025, as the lagged impact of monetary policy tightening suppresses domestic demand. Improving external conditions should help narrow the trade deficit, especially through tourism. Budget 2024 should deliver a tight fiscal stance in the near term and provide a comprehensive consolidation strategy for the medium term. Monetary policy is appropriately tight and should remain restrictive to ensure a timely return of inflation to target. Structural reforms are needed to boost the housing supply, revive productivity growth, lower emissions, and address challenges from climate change. The ongoing housing affordability challenges cannot be solved without a significant increase in residential construction. Policy recommendations include reforming land use restrictions, addressing local infrastructure funding needs, and using land value and capital gains taxes to incentivize more efficient land use.