The economic outlook is looking increasingly positive with rising confidence, solid exports and low short-term interest rates.
Photo: RNZ
The economic outlook is looking increasingly positive with rising confidence, solid exports and low short-term interest rates positioning 2026 for growth, according to Westpac’s first quarter economic overview.
“After a rocky few years, the New Zealand economy looks to be on much firmer footing in 2026,” Westpac chief economist Kelly Eckhold said.
Westpac estimated annual economic growth lifted to 1.8 percent in the year ended 2025, with annual growth accelerating to 3.3 percent in 2026 and 2.7 percent in 2027.
Eckhold said the unemployment rate was expected to fall below 5 percent in the second half of 2026 and decline further over 2027, from 5.4 percent in the year just ended.
Westpac chief economist Kelly Eckhold.
Photo: Supplied / LinkedIn
“Average borrowing costs are expected to decline further in 2026 as more borrowers roll off earlier fixed terms onto lower mortgage rates. That will help support demand across the domestic economy.”
He said inflation, which had surprised to the upside in late 2025 at 3.1 percent was projected to moderate over 2026, though price pressures remained broad-based, and core inflation was expected to linger above the midpoint of the Reserve Bank (RBNZ)’s target of 2 percent through the rest of the year.
However, he said the RBNZ was likely keep the OCR (official cash rate) at current levels until the end of the year.
“The RBNZ will take most of 2026 to gain confidence that the economic recovery is sustained and durable,” Eckhold said.
“But from then they will move quickly to restore neutral interest rate settings and then move interest rates to slightly restrictive levels in 2028.”
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
