After a difficult 2025 marked by recession and slow activity, New Zealand’s economy is showing broad signs of stabilisation and budding recovery — not just in isolated sectors, but across the board, according to KiwiBank’s latest economic outlook.
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KiwiBank Economic Commentary — 13 November 2025
Interest Rates Have Reached Supportive Levels
Economists at KiwiBank highlight that interest rates are now much lower than they were this time last year, a major shift that matters for growth. The Reserve Bank of New Zealand (RBNZ) has shifted policy into stimulatory territory after cutting the Official Cash Rate to around 2.25%. That move, while late in the cycle, sets the stage for economic recovery in 2026 by easing financial conditions for households and businesses.
Early Signs of Strength Emerging
- Household spending is spreading into discretionary areas, suggesting rising consumer confidence and improved budgets.
- Business activity is showing lift, with demand responding to more supportive monetary settings.
- External sectors (exports and tourism) held up well through 2025.
Economists observe that demand destruction from higher rates is beginning to unwind, particularly in interest-rate sensitive parts of the economy such as housing and consumption.
Housing Market and Labour Conditions
The housing market is expected to recover in 2026, with lending activity rising as mortgage rates stay low and investor appetite returns.
The labour market — soft after the recession — continues to stabilise, with unemployment expected to peak around 5.3 % before improving next year.
Growth Forecasts for 2026 and Beyond
The KiwiBank outlook sees New Zealand’s economy expanding again in 2026, with growth around 2.4 % if no major external shock hits, and further gains in 2027. This reflects a rebound from the depth of 2025’s downturn, with the interest-rate sensitive sectors starting to catch up.
Inflation and Monetary Policy
While inflation peaked above target during recent years, it is now closer to the RBNZ’s 1–3 % range and expected to ease further into 2026, supporting the case for sustained lower interest rates.
External Environment
Global conditions and trade headwinds still pose risks, but recent company earnings and export performance have shown resilience. Demand for key exports — including dairy and meat — is expected to remain a strong pillar of growth.
Key Takeaways
2025:
Marked by recessionary pressures and slow domestic momentum.
High interest rates initially dampened growth and confidence.
2026 Outlook:
- Interest rates at stimulatory settings
- Household and business confidence rising
- Housing and labour markets stabilising
- Economy forecast to grow ~2.4 %
Risks:
- External shocks could weaken momentum.
- Labour market and consumer demand recovery may lag.
In Summary
KiwiBank economists believe New Zealand has likely hit the lows of the cycle and that the conditions for recovery are now in place. With lower monetary policy settings, stronger consumer and business activity indicators, and resilient export performance, 2026 is positioned as the year of economic rebound — assuming no major negative shocks emerge