Household finances were under strain and prices soared in 2022, presenting big economic challenges to the Labour Government as Prime Minister Jacinda Ardern seeks a third term in this year's election.
Here are the top five troubles that hit New Zealand's economy last year, which initially weathered the COVID-19 storm well before being gripped by labour shortages and rising inflation.
Omicron
Heavy strains were placed on New Zealand's economy by the arrival of the Omicron variant of COVID-19 in early 2022, with supply-chain breakdowns and workers being forced into isolation.
It came as businesses were already stretched by a lack of foreign workers due to tight border restrictions, which did not completely reopen until August.
Businesses had hoped the reopening would lead to an influx of foreign workers but many reported ongoing issues with immigration settings hindering their arrival.
Russia-Ukraine war
Russia's February 24 invasion of Ukraine has spread economic chaos across the world, and New Zealand wasn't immune.
Sanctions against Russia led to steep price rises for products including fertiliser and energy, fuelling inflation across the global economy.
Climbing consumer prices
Loosely tied to the above events, New Zealand's annual inflation rate has hit a series of highs not seen in decades, touching 7.2 percent in the September quarter.
The Government lowered taxes on petrol - one of the major drivers of inflation - to help ease the burden on New Zealand motorists.
Food prices also rose sharply, soaring 10.7 percent year on year in November.
Recession avoided - but for how long?
Statistics NZ said in September the country had avoided a recession after gross domestic product lifted 1.7 percent, after an unexpected 0.2 percent contraction in the previous quarter.
But New Zealand is broadly expected to enter a recession in 2023, with the economy likely to temporarily contract by about 1 percent, the Reserve Bank (RBNZ) said in November.
Reflecting inflation concerns, the RBNZ raised the official cash rate (OCR) by 75 basis points in November - the most significant jump on record. Since October 2021, the central bank has added 400 basis points to its benchmark interest rate.
House prices still on decline
Despite not yet bringing inflation under control through interest rates, its aggressive OCR hikes more-than-successfully weakened a housing market that was red hot during 2020 and 2021.
New Zealand's average house prices rose by more than 40 percent at the height of the COVID-19 pandemic before peaking in November last year, at levels the RBNZ said were unsustainable.
Average house prices were expected to decline by 11.5 percent this year and 6 percent in 2023, a Reuters survey in November showed.
However, while prices have retreated sharply, the downturn was still not enough to solve the affordability crisis.
Large deposits being required remained a major hurdle, while the pace of higher interest rates were also having a major influence.
