Photo: RNZ / Rebekah Parsons-King
There is light at the end of the tunnel for the economy, as inflation and interest rates continue to ease.
ASB's latest quarterly forecast indicates economic growth will be flat or down for the rest of this year, while global growth also remained below average.
GDP, which had contracted in two of the past six quarters through to March 2024, was also down 0.5 percent from its 2022 peak, and more than 4 percent down on a per-capita basis.
ASB chief economist Nick Tuffley said the economy had been showing "increasing signs of brittleness under the continued pressure from high interest rates", but there were brighter days ahead.
"Painful as it is, inflation is getting under control," he said.
"Recent encouraging signs suggest the Reserve Bank can be confident inflation will fall below 3 percent over the second half of this year and remain well contained beyond 2024."
The Reserve Bank cut the official cash rate by 25 basis points to 5.25 percent last week, with further falls expected over the rest of this year and next.
"Falling interest rates will be a catalyst for renewed consumer and investment spending, spurring economic recovery over 2025," Tuffley said.
While household spending remained under some pressure, he said it had a good start to 2024 compared to 2023.
Tuffley said the New Zealand dollar was expected to creep up over 2025, as global growth recovered and the US Federal Reserve cut interest rates, with NZD forecast to rise to 70 US cents by March 2027.
"However, the NZD may come under pressure in the short term if the RBNZ cuts interest rates ahead of the US Fed," he said.
"The NZ dollar has scope to fall slightly below 0.90 against the Australian dollar, although Australia's relative economic outperformance has been increasingly reflected in the rate."