Can New Zealand’s economy bounce back?

Summary

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Business Daily (BBC World Service)

Episode Title: Can New Zealand’s economy bounce back?
Date: March 17, 2025
Host: Alex Van Vell

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Overview:

This episode explores the challenges facing New Zealand’s economy in 2024–25, following a recession that bit harder here than in most developed countries. Host Alex Van Vell investigates whether Prime Minister Christopher Luxon’s promises of businesslike reform and economic renewal can withstand a tough reality: high emigration, sluggish growth, battered industries (especially construction), and rising public skepticism.

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Key Discussion Points & Insights

1. The Economic Backdrop: Stalling Growth, Rising Costs

• Recession Aftershocks:
  • New Zealand’s economy has possibly contracted more than any other developed nation in the past year ([03:30]).
  • Record outbound migration: Over 130,000 people left New Zealand in the year to June 2024; more than 55,000 were Kiwis ([08:34]).
• Inflation and Interest Rates:
  • Inflation climbed as high as 7%, but dropped to a little above 2% following aggressive interest rate hikes ([05:02]).
  • Alex: “Inflation does now seem under control ... but it’s come with a compromise. Figures in December showed a second consecutive quarter of negative GDP, technically a recession and unemployment rising.” ([05:02])
• Cost of Living:
  • Retail and urban life have slowed. “It's the middle of the week and it's very, very quiet, apart from the pigeons and the odd seagull ... this is eerie. The cost of living has clearly triggered a self-imposed freeze by consumers.” ([03:30])

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2. Political Promises vs. Economic Realities

• Christopher Luxon’s Business Mandate:
  • Former Air New Zealand CEO; campaigned on business expertise, tax cuts, and efficient government ([02:50]).
  • “My pledge to you is that our government will deliver for every New Zealander, because we will rebuild the economy and deliver tax relief. We will bring down the cost of living.”
    — Christopher Luxon ([03:13])
• Reality Check:
  • Political analyst Ben Thomas: “It’s a bit too much, I think, to expect that a chief executive would be able to come in and, you know, make a few executive orders to improve the economy. It’s not like sending a memo.” ([02:00]; also [17:51])

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3. Construction: Industry in Crisis

• Sector in Freefall:
  • “Construction had the unfortunate distinction of being the industry which had the worst year in 24.” ([05:02])
  • Public sector job cuts (close to 10,000 reported), but construction even worse off with job losses and liquidations ([05:02], [08:34]).
• Personal Perspective:
  • Ryan Ruth, Next Level Civil:
    • “The main priority has been just trying to keep things ticking ... we've got employees, we've got mouths to feed ... the most important thing is having a pipeline of work, having a client base and projects lined up that you know you’re going to get paid for.” ([06:36])
    • On the year: “Last year has mentally been one of the toughest years. I've been one in business and two in the industry. Everyone’s a little bit more hot headed than usual ... just makes a difficult environment, especially when you throw money involved in the middle of it as well.” ([07:05])
    • Noted many colleagues leaving for Australia, some temporarily, others for good ([07:40])
    • Plea to government: “They need to act fast and they need to act with tangible results ... good positive chat isn’t contracts awarded and boots on the ground.” ([08:11])
• Migration to Australia:
  • “Fewer work opportunities triggered a rush for the exits.” ([08:34])

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4. Government Responses and Policy Moves

• Finance Minister Nicola Willis:
  • Responsibility now expanded to “economic growth” ([10:53]).
  • “We want to open ourselves out to the world and welcome international talent, skills and capital as a means to grow our economy.” ([11:32])
  • Defends policy record:
    • “The previous government had not taken measures to increase fiscal sustainability ... leaving it to our independent reserve bank to lift interest rates significantly ... we've bounced along the bottom in terms of growth since 2022. Essentially, we as a government in the hangover after several years of big spending, big inflation, big borrowing and we are unwinding that now.” ([12:04])
  • On construction: Cites “rate reductions” as the most important support, with further cuts expected, and promises infrastructure investment ([13:02]).
  • Migration pain: “It’s very painful. And one of my reasons for being in the New Zealand Parliament is that I want to ensure that young people growing up here can see that their talent can be used to its full extent ... their ambitions ... lived out in New Zealand.” ([14:15])

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5. The Talent Exodus: Stories from Abroad

• Tanuj Ganeja (TJ), Construction Professional in Melbourne:
  • Longs for New Zealand but left for better prospects.
  • “There’s definitely a joke in the construction industry ... the amount of Kiwis currently in Melbourne working in construction who have moved here over the last few years. ... It comes down to opportunities, it comes down to future growth ... Am I going to hit the ceiling in New Zealand?” ([15:35])
  • On returning:
    • “There’s never been a consistent pipeline of projects in New Zealand ... a consistent pipeline is crucial to keep the talent in New Zealand.” ([16:14])

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6. Consumer Squeeze and Living Costs

• Day-to-Day Impact:
  • Coffee as a symbol:
    • “Now there's speculation a cup of coffee could cost 10 New Zealand dollars before long.” ([16:35])
    • Current prices in Auckland: Most expensive coffee at $7.50; “only $2.50 away from that $10 mark.” ([17:13])
    • Mel, local manager: “We don’t like putting the price up because if you make it too expensive, then people clearly aren’t going to buy a coffee anymore.” ([17:34])

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7. Leadership Style and Communication

• Christopher Luxon vs. Jacinda Ardern:
  • Ben Thomas: “Luxon is often, I think, sort of gently lampooned for his communication. He uses a lot of business consultancy speak ... decision gates, placing the big rocks first ... boiling the ocean.” ([18:56])
• Limits of a Corporate Approach:
  • “It’s a bit too much ... to expect that a chief executive would be able to come in and ... make a few executive orders to improve the economy. It’s not like sending a memo.” — Ben Thomas ([17:51])

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Notable Quotes & Memorable Moments

• Ben Thomas on Luxon’s style vs. substance ([17:51]):
  “He was a chief executive and he’s brought a lot of those sort of disciplines to the public service. … That’s quite a different matter to … the incalculable number of moving parts in the economy of a developed nation.”

• Ryan Ruth’s plea to government ([08:11]):
  “Good positive chat isn’t contracts awarded and boots on the ground.”

• Nicola Willis on keeping talent at home ([14:15]):
  “One of my reasons for being in the New Zealand Parliament is that I want to ensure that young people growing up here can see that their talent can be used to its full extent and that their ambitions … can be lived out in New Zealand.”

• Tanuj Ganeja on opportunities abroad ([16:14]):
  “There’s never been a consistent pipeline of projects in New Zealand ... a consistent pipeline is crucial to keep the talent in New Zealand.”

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Timestamps for Important Segments

• 01:23 — Episode introduction, overview of New Zealand's economic woes
• 03:13 — Christopher Luxon’s promises and businesslike leadership pitch
• 05:02 — Breakdown of inflation, interest rates, and recession
• 06:14–08:34 — In-depth look at the construction crisis and personal impacts
• 08:34 — Record migration statistics
• 10:24 — PM Luxon’s 2025 “state of the nation” speech
• 11:32–15:02 — Government responses via Nicola Willis, focus on growth and migration
• 15:02–16:35 — Experiences of a Kiwi expat (Tanuj Ganeja) in Australia
• 17:04–17:34 — Coffee prices as a metaphor for consumer costs
• 17:51–18:56 — Ben Thomas on leadership style, “corporate PM” vs. national complexity
• 19:34 — Summary of the government’s real challenge: Convincing citizens their future is at home

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Closing Thought

The episode leaves listeners with the sense that while New Zealand’s new government may have staved off some of the worst economic trends, real recovery will depend as much on restoring local confidence as on fiscal maneuvering. The exodus of talent and the battered construction sector are symptoms of deeper uncertainty—and a sobering reminder that slick business metaphors don’t always translate into national turnarounds.

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Transcript

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[Alex Van Vell]

Revving of pneumatic drills isn't heard much in Auckland right now.

[Ryan Ruth]

Last year has mentally been one of the toughest years I've been one in business and to in the industry.

[Alex Van Vell]

Welcome to Business Daily on the BBC World Service. Hello, I'm Alex Van Vell in New Zealand as it struggles to shake off recession, possibly its biggest challenge is keeping its workforce at home.

[Government Official (possibly Nicola Willis)]

Look, it's very painful and one of my reasons for being in the New Zealand Parliament is that I want to ensure that young people growing up here can see that their talent can be used to its full extent and that their ambitions and aspirations can be lived out in New Zealand.

[Alex Van Vell]

Today we ask did the new prime minister here over promise when he took over in late 23.

[Ben Thomas]

It's a bit too much, I think, to expect that a chief executive would be able to come in and, you know, make a few executive orders to improve the economy. It's not like sending a memo.

[Alex Van Vell]

And we'll drill into the industry which hurt most last year. If you're measuring by job losses and liquidations. That's all here on Business daily from the BBC. Let's go back to October 23rd. Inflation rampant, interest rates sky high. It was a country with long Covid.

[Christopher Luxon]

Well, thank you, thank you so much and thank you New Zealand. Because from all over your country, this great country, you have reached for hope and you have voted for change.

[Alex Van Vell]

Enter Christopher Luxon, a former Air New Zealand CEO. He pledged to run the country with business efficiency, lower taxes and economic discipline. But here's the twist. It isn't a corporation, it's a complex democracy. And with terms of only three years, the pressure for quick fixes is intense.

[Christopher Luxon]

And my pledge to you is that our government will deliver for every New Zealander because we will rebuild the economy and deliver tax relief. We will bring down the cost of living.

[Alex Van Vell]

It sounded good, but almost 18 months on, the country's still in turbulence. And last year its economy possibly contracted more than any other developed country. I've come to Vulcan Lane, just off Queen street in Auckland, supposedly the beating heart of the city's retail district. It's the middle of the week and it's very, very quiet, apart from the pigeons and the odd seagull. Yes, New Zealand is known to almost completely close down over the summer, but this is eerie. The cost of living has clearly triggered a self imposed freeze by consumers.

[Ben Thomas]

The coalition government came to power off the back of a cost of living crisis.

[Alex Van Vell]

Political analyst Ben Thomas, you know, and.

[Ben Thomas]

That was initially spurred by the high inflation, rising costs, you know, which all came off the back of that pandemic hangover which, you know, many countries around the world have experienced. And New Zealand with a central bank. The reaction to the high cost of living and out of control inflation is raising interest rates, taking money out of family's pockets, making things tougher for businesses. And the national government really came in at the sort of meeting of those two waves where inflation was still relatively high, but interest rates were also very high. So that makes it very, very difficult for families who are kind of squashed in the middle.

[Alex Van Vell]

And for business, let's break it down with a change of government, there's always a lull as the newcomers get their hands on the machinery and find out where it needs oil. And if your predecessor was a big public spender buying its way out of a pandemic, it's never going to be easy to cut to the present. Inflation does now seem under control, down from a 7% high and hovering just over 2%. But it's come with a compromise. Figures in December showed a second consecutive quarter of negative gdp, technically a recession and unemployment. Rising public sector job cuts got the most attention last year. State media estimating close to 10,000 positions disappeared. The government contends that fewer than 2,000 people were actually laid off. Whatever the truth of it, a different sector suffered even more. Construction had the unfortunate distinction of being the industry which had the worst year in 24. I went out to a building site in Auckland to meet a man whose mantra last year was survive to 25.

[Ryan Ruth]

My name's Ryan Ruth and I'm the managing director of Next Level Civil Limited. We're a small to medium earthworks civil company based in South Auckland, New Zealand.

[Alex Van Vell]

For much of 24, there was a ghastly collision of persistent inflation, high interest rates and dwindling confidence. It meant taking whatever work you could get.

[Ryan Ruth]

The main priority has been just trying to keep things ticking, trying to keep a pipeline of work happening. I mean we've got employees, we've got mouths to feed, we've got, you know, we're ultimately responsible to put roofs over people's heads. So you sort of boil it back down to the basics and for us the most important thing is having a pipeline of work, having a client base and projects lined up that you know, know you're going to get paid for.

[Alex Van Vell]

Has it been tough for you personally?

[Ryan Ruth]

Definitely, definitely it has been. Last year has mentally been one of the, the toughest years. I've, I've been one in business and two in the industry. Everyone's a little bit more hot headed than usual. They're a little bit more stressed than they usually are and it just makes a difficult environment, especially when you throw money involved in the middle of it as well. So yeah, it has been a relatively tough year.

[Alex Van Vell]

Have you watched people in the construction industry leave the country and go to Australia and elsewhere?

[Ryan Ruth]

Definitely, definitely a lot of them. There's sort of two sides to them. One of them, one side has gone over to just sort of see the next couple of years out while New Zealand's recovering from its recession and from its downturn, you know, to still make good money, still be able to support their family, still get ahead. The other side of it is people who have just entirely sold up and left for Australia and they don't plan on returning.

[Alex Van Vell]

So what's your message or plea to this coalition government? What could they do? What do you want them to do?

[Ryan Ruth]

They need to act fast and they need to act with tangible results. At this point in time there isn't a lot of faith that there's just going to be an overnight change and I mean, we don't know whether it's going to get any better or any worse yet. There's a lot of good, positive chat coming out of the government, but good positive chat isn't contracts awarded and boots on the ground.

[Alex Van Vell]

Ryan's company survived, but many didn't. And the growing liquidation list of construction companies made grim reading. Fewer work opportunities triggered a rush for the exits. In the year to June 24, an annual record was set for the number of people leaving New Zealand around 130,000 migrants in total, more than 55,000 of them Kiwis. A third of the migrants went to Australia, many citing better wages, lower living costs and greater opportunities. This is Business Daily from the BBC World Service.

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[Alex Van Vell]

I'm Alex Van Vel. New Zealand's government promised economic renewal, but with a recession biting and thousands heading offshore today, we're asking, is that promise holding up?

[Christopher Luxon]

It is so great to be here and I am ready and I am pumped for 2025 and I hope all of you are as well.

[Alex Van Vell]

The past year doesn't seem to have dampene Prime Minister Christopher Luxon's optimism. He assembled a supportive crowd to deliver a State of the nation speech in late January.

[Christopher Luxon]

Well, I'm here today to talk about the economy and almost nothing else.

[Alex Van Vell]

Recovery was front and centre.

[Christopher Luxon]

Going for growth is without a doubt the number one job this year. And right now it's still too tough for too many Kiwis. High inflation and high interest rates have pummeled families and the wider economy, leading to what is the biggest recession we've had since 1991. And last year we put in place a platform of growth, thanks to our exceptional Finance Minister, Nicola Willis. And we worked hard to get the cost of living under control and we've made a lot of money.

[Alex Van Vell]

The Prime Minister does appear to have been busy. In little over a year, his government has drastically pared back the public service, as you heard. It's also claimed credit for interest rate cuts, which the country's Independent Reserve bank brought in late last year. Once in, it judged inflation to have been temporarily tamed. Now the government's also created Invest New Zealand, a dedicated agency to attract foreign money, and introduced visa changes to lure people in. The Finance Minister, Nicola Willis, referred to by Luxon a minute ago, has now also been given responsibility for economic growth.

[Government Official (possibly Nicola Willis)]

We won't get wealthy as a country selling to ourselves. With a population of 5 million people, we want to open ourselves out to the world and welcome international talent, skills and capital as a means to grow our economy, to attract investment into productive industries and businesses and deliver the world Class infrastructure that New Zealanders deserve.

[Alex Van Vell]

Your government, the coalition government, came into power in 2023 promising to stimulate business. What happened from your perspective?

[Government Official (possibly Nicola Willis)]

The previous government had not taken measures to increase fiscal sustainability to ease the pressure on inflation, leaving it to our independent reserve bank to lift interest rates significantly, up 525 basis points since 2021. And that had the impact of putting a huge handbrake on our New Zealand economy, contracting growth. And so we've bounced along the bottom in terms of growth since 2022. Essentially, we as a government in the hangover after several years of big spending, big inflation, big borrowing and we are unwinding that now.

[Alex Van Vell]

My understanding is the construction industry was possibly the worst hit as far as the private sector is concerned. Thousands of jobs went there too, and liquidations, they tell me. There's been good talk from government but no action as yet.

[Government Official (possibly Nicola Willis)]

Well, I think you'd get a different response from others in the construction industry. As you know, that's a sector that is very sensitive to interest rates because development can better take place in an environment of low interest rates. So the single most important thing we've delivered so far are rate reductions. And economists are widely forecasting another 50 basis point reduction in April. We are also looking to support that sector with significant infrastructure investment, laying out at pipeline of investment and roads of national significance and increases to public facilities, including health facilities, school buildings.

[Alex Van Vell]

But is there a chance that if you're attracting foreign companies into New Zealand it'll just increase the competition for local construction firms and make it more difficult?

[Government Official (possibly Nicola Willis)]

I have every confidence that our local construction firms will not only be able to compete with international players, but will benefit as subcontractors in some instances. We are seeing evidence of that in our economy when major players come here.

[Alex Van Vell]

In that context, migration of workers to Australia and beyond peaked last year because of the conditions here. How painful was that for you to endure?

[Government Official (possibly Nicola Willis)]

Look, it's very painful. And one of my reasons for being in the New Zealand Parliament is that I want to ensure that young people growing up here can see that their talent can be used to its full extent and that their ambitions and aspirations can be lived out in New Zealand. We have had a culture in New Zealand for some years of finding reasons to say no to growth enhancing initiatives. And when New Zealanders look at Australia, which takes a very proactive stance on, for example, mining, on permitting new projects, new developments, it's obvious that the wealth those things create is something that New Zealand could benefit from.

[Tanuj Ganeja]

I miss my family, I miss my friends, I Miss the beaches. I miss going out there without thinking about getting bitten by a snake. You know you cannot beat New Zealand when it comes to those things.

[Alex Van Vell]

Tanuj Ganeja, or tj, is a construction professional in Melbourne, Australia. He left Auckland for the opportunities across the Tasmania. Unemployment in New Zealand is hovering at just over 5%, which may sound reasonable to European ears, but masks a deeper problem, the quality of jobs available now.

[Tanuj Ganeja]

There's definitely a joke in the construction industry right now, the amount of Kiwis currently in Melbourne working in construction who have moved here over the last few years. And you do ask them in terms of why are you moving in? You never hear pay as one of the key drivers. Of course it's a driver, it plays a part, but it's never the key driver in their decision. I think it comes down to opportunities, it comes down to future growth. It comes down to what happens in 5 years time. Am I going to hit the ceiling in New Zealand? Whereas if you do move to Australia, whether it's Melbourne, Sydney, it's just that many more opportunities.

[Alex Van Vell]

What would it take to tempt you back in your working life? If you could name one thing.

[Tanuj Ganeja]

There's never been a consistent pipeline of projects in New Zealand. There's always, okay, there's a project that we're doing right now which will go on for the next two to three years this year, then towards the end, you start thinking about, okay, what am I going to next? What am I going to do? Or am I going to be sitting in the head office for the next six months looking for my next project? So I think a consistent pipeline is crucial to keep the talent in New Zealand.

[Alex Van Vell]

Let's put all this in a global context. While New Zealand struggled last year, Australia chugged along. The UK managed a tepid recovery. Canada and the us, they're wrestling with their own challenges, but they've got diverse economies, a buffer New Zealand lacks. Now there's speculation a cup of coffee could cost 10 New Zealand dollars before long. Mel manages the Three Beans Roastery in central Auckland.

[SAP Concur Representative]

Do you want that head here or take away?

[Alex Van Vell]

I think I'll have it. So your most expensive coffee at the moment is $6.70.

[SAP Concur Representative]

Not if you have an iced mocha, which would be with, let's say almond.

[Alex Van Vell]

Milk, which is $7.50, so only $2.50 away from that $10 mark. When do you think you're going to hit that?

[SAP Concur Representative]

Hopefully not this year.

[Alex Van Vell]

I mean, we're hoping that in March the price of beans isn't going to go up.

[SAP Concur Representative]

We don't like putting the price up because if you make it too expensive, then people clearly aren't going to buy a coffee anymore.

[Government Official (possibly Nicola Willis)]

Thank you.

[Alex Van Vell]

You're very welcome. Did New Zealand put too much faith in its corporate PM back on election night in 23, political analyst Ben Thomas.

[Ben Thomas]

Again, he is often compared to a former prime minister, John Key, who was a currency trader, Luxon, not really involved in sort of business and finance in that way. He was a chief executive and he's brought a lot of those sort of disciplines to the public service. But, you know, look, a company will generally have, you know, a few strategic goals. At Unilever, he was in charge of, you know, increasing market share for certain products. That's quite a different matter to, you know, the incalculable number of moving parts in the economy of a developed nation. It's a bit too much, I think, to expect that a chief executive would be able to come in and, you know, make a few executive orders to improve the economy. It's not like sending a memo.

[Alex Van Vell]

Communication is absolutely critical. Obviously, as a prime minister and it was one of the strengths of Jacinda Ardern and for which she became known internationally. How would you put Christopher Luxon alongside her as a communicator?

[Ben Thomas]

Luxon is often, I think, sort of gently lampooned for his communication. He uses a lot of, I guess you'd call it business consultancy speak. He's made no secret of the fact that he's a big fan of business management and self help kind of books. He's introduced a lot of new concepts and terms into the New Zealand lexicon. Decision gates, placing the big rocks first when you're doing negotiations and I think boiling the ocean. Apparently a metaphor from the business world about taking on appropriately sized tasks to do.

[Alex Van Vell]

The government here insists the worst is over, even though it accepts unemployment may not have peaked yet. So its real test now is probably less to do with spreadsheets and figures. It's more about whether it can convince its people that their future lies at home. That's it from me. Alex Van Vell in Auckland and ends this edition of Business Daily. You can find more episodes wherever you get your BBC podcasts. And if you want to get in touch, our email address is business dailybc.co.uk thanks for listening.

[SAP Concur Representative]

Hey, Ryan. That was a fast trip. It was like you teleported.

[Ryan Ruth]

Yeah, just got in. I'll get all my expenses logged, I promise.

[SAP Concur Representative]

Oh, no, you're okay. SAP concur uses advanced AI so your expense report will practically write itself. Quite the breakthrough. It's like we've been teleported into the future. All right, so just curious. Would you give us written permission to convert your matter into energy patterns and reassemble you at, say, random travel destinations?

[Ryan Ruth]

Margaret, are you building a teleporter?

[SAP Concur Representative]

No. Yes.

[Alex Van Vell]

SAP. Concur. Helps your business move forward faster. Learn more at concur. Com.