New Zealand Faces $5.2B GDP Loss Due to Rising Electricity Prices and Manufacturing Closures

New Zealand is projected to experience a GDP loss of $5.2 billion by 2025, primarily due to a 1.65% drop in household spending attributed to soaring electricity prices. The modelling, conducted by Sense Partners for the Ministry of Business, Innovation and Employment (MBIE), suggests that if electricity prices had been 33% lower from 2017 to 2025, the economy would have fared better.

The analysis highlights significant stress in the manufacturing sector, evidenced by closures of major facilities and a chilling effect on capital expenditure. From 2014 to 2025, wholesale electricity prices surged from an average of $69 per kWh to $152 per kWh, peaking at $468 per kWh in August 2024.

The government is pursuing measures such as risk assessments and potential LNG imports to address these challenges, but skepticism remains regarding their effectiveness. The Electricity Authority is set to publish its final recommendations on market reforms in early 2026.