ASB has expressed optimism about the economic outlook for next year, supported by a combination of reduced interest rates, strong exports, and steady consumer spending.
“We’re seeing clear signs that the recovery is gathering pace. Consumer spending is up, especially on big-ticket items like cars and electronics, and rural incomes are holding strong despite global uncertainty,” ASB chief economist Nick Tuffley said.
He mentioned that the advantage of declining interest rates will persist as households refinance their mortgages, which is expected to boost consumer spending.
Tuffley said the rural sector would maintain strong incomes despite milk prices easing from highs, Fonterra shareholders enjoyed the extra benefit of a $3.2 billion capital return, and beef producers were currently exempt from US tariffs.
He noted that the growth prospects for the country’s main trading partners remained below average due to US tariffs.
However, New Zealand has been expanding its market diversity, while tourism experienced only modest growth.
“Continued tourism recovery will be linked to improvements in global growth and confidence, which will both take time to come through.”
Meanwhile, employment, at 5.3%, is expected to take longer to improve, not dropping below 5% until 2027.
“The jobs market is also stabilising after a period of overall job losses … Job ads are on the way up, and 2026 should bring strengthening employment prospects.”
A slight increase in the housing market driven by lower borrowing costs, an abundance of listings, and prices that remain relatively stable.
Prices are projected to increase by 3-4%.
“Mortgage rates are about as low as they are likely to go,” Tuffley said.
“People who have been waiting for interest rates to reach the lows before acting have nothing further to wait for.”
ASB predicts the official cash rate will remain at 2.25% throughout next year, followed by a couple of increases in early 2027.