After a year of relentless pressure on household budgets and business bottom lines, there are signs the tide may be turning, with economists predicting a gradual improvement in the economic outlook in the months ahead.
Westpac chief economist Kelly Eckhold sees an economic rebound in 2026, projecting GDP growth of around 3%.
“That’s supported by lower interest rates in the coming year,” Eckhold said. “Whereas in 2025 we saw relatively strong performance by the primary sector and tourism to some extent but not so much the services sector and the bits of the economy that really drive the major urban areas, we think we probably have much more balanced growth in 2026.”
He said households may not experience wage growth at first, as it tends to lag behind other indicators, though inflation is expected to ease.
“The cost of living crisis should ease off a bit.”
Infometrics chief forecaster Gareth Kiernan said conditions are set to improve.
“You’ve had good export prices, you’ve got interest rates which are headed lower than we had been thinking… there’s a bit of caution coming on some of those exports… but I think between the effects of the strong prices over the last 18 months and the low interest rates and the government doing more in the infrastructure space – if not anywhere else, you put all those together and there are enough signs that growth should be better.”
“Trump and the tariffs had derailed things somewhat through the early part of this year, and that sort of has hung over the economy for the rest of 2025. But who really knows in that space, I guess.”
He pointed to early indicators of a strengthening labour market, adding that this positive momentum should continue to gain traction.
“There does seem to be a bit more of an air of optimism and maybe a bit more genuine growth starting to come through as opposed to the high business confidence we had a year ago, which didn’t really translate into anything much this year.”
Meanwhile, BMI, a Fitch Solutions company, anticipates 2% growth this year.
“The Reserve Bank of New Zealand’s rate cuts will continue to ease monetary policy conditions – even if most of the easing cycle is likely behind us – supporting household spending and business investment.”
“We anticipate a 25 basis point cut to 2% by the end of 2026. Government infrastructure projects – including Auckland’s City Rail Link, major highway upgrades such as the Waikato Expressway, and water resilience programmes – will add momentum. Externally, strong demand for dairy and meat, alongside a tourism rebound, should underpin growth.”
“However, downside risks persist. An escalation in global trade tensions or new tariffs could weaken export performance, while a slower-than-expected recovery in Mainland China – New Zealand’s largest trading partner – would dampen agricultural demand.”
“Domestically, persistent labour shortages and wage pressures could restrain productivity, and delays to infrastructure projects would reduce fiscal support.
It said if inflation remains persistent, the Reserve Bank could pause or even reverse its rate cuts, dampening the expected boost to consumer spending and investment.