New Zealand has entered a technical recession – but what does it mean for Kiwis? Infometrics economist Brad Olsen breaks it down. ➡️ SUBSCRIBE:

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Explained: NZ has entered a recession – but what does it mean for Kiwis?

In recent news, it has been revealed that New Zealand is in a state of recession. The Covid-19 pandemic has undoubtedly played a significant role in putting the economy under pressure, impacting businesses, jobs, and the livelihood of many Kiwis. But what exactly does this term “recession” mean, and what can we expect in the coming months?

A recession is commonly defined as a significant decline in economic activity over a sustained period of time, typically measured by two consecutive quarters of negative GDP growth. In simpler terms, it signifies that a country’s economy is shrinking rather than growing. For New Zealand, this is the first time in over a decade that the nation has fallen into a recession.

A recession affects a wide range of sectors and individuals, and its consequences can be far-reaching. Here’s a closer look at what it means for Kiwis:

1. Job losses: One of the most immediate impacts of a recession is an increase in unemployment rates. As businesses struggle to stay afloat, they often cut jobs as a cost-saving measure. This results in a significant number of Kiwis losing their livelihoods and facing financial difficulties. Government support packages, such as wage subsidies, may be implemented to ease the burden, but they may not be sufficient for everyone.

2. Reduced wages and income: In a recession, businesses may not only lay off workers but also reduce salaries and wages to cut costs. This means that even those who manage to retain their jobs may experience a decrease in their income. As a result, households may have to tighten their budgets and make difficult decisions regarding their spending habits.

3. Decline in consumer spending: With reduced disposable income and increased uncertainty, consumers tend to become more cautious about their spending. This can have a detrimental effect on businesses, especially those in the retail and hospitality sectors, as people cut back on non-essential purchases and activities.

4. Increased government debt: During recessions, governments often implement stimulus measures to revive the economy. This may include increased spending on infrastructure, social welfare, or tax cuts to encourage investment and boost consumption. However, these measures come at a cost and can lead to an increase in government debt. It is important to ensure that such debt is manageable and does not burden future generations.

5. Opportunities for some: While recessions bring forth economic challenges, they also offer certain opportunities. Industries such as healthcare, technology, and essential services may experience growth and job creation. Additionally, individuals willing to upskill or retrain themselves in high-demand areas may have a better chance of securing employment.

As the recession continues to unfold, it is crucial for Kiwis to be financially prepared for the uncertainties ahead. It may be wise to focus on strengthening personal finances, such as reducing debt, building emergency funds, and exploring alternative income sources. Seeking professional advice and staying updated with government support initiatives can also prove beneficial during these challenging times.

While a recession inevitably brings hardships for many, it is important to remember that New Zealand has weathered economic storms in the past and emerged stronger. With resilience, adaptability, and support from both the government and communities, Kiwis can navigate this difficult period and work towards a brighter future.