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New Zealand enters 2026 with its long-anticipated economic recovery still looking unconvincing, according to Infometrics’ latest forecasts. Despite lower interest rates, more focus on government investment, and historically high export incomes, indicators show momentum remains fragile.

The Reserve Bank is walking a fine line between kick-starting the economy’s recovery and overstimulating growth by the end of next year, according to Infometrics’ latest forecasts.

Most costs for transport operators declined in the June quarter, with only unchanged road user charges and a modest increase in labour costs bucking the falls.

Last week the government announced the next steps for replacing petrol tax with electronic road user charges (RUCs). These changes have been signalled in the past, including as part of the governments’ 2025Q2 action plan in April.

The emerging international trade war has created uncertainty about global growth prospects and US trade and foreign policy, which could knock as much as 1.4 percentage points off New Zealand’s GDP growth during 2026, according to Infometrics’ latest economic forecasts.

There’s reason for optimism about the New Zealand economy and business conditions over the next 24 months, according to Infometrics’ latest forecasts, as the post-inflation recession gets put behind us and interest rates return to more normal levels. Although economic growth is not forecast to get above 2.5%pa during 2025 and 2026, the recovery will be underpinned by increased household spending, a more stable housing market, and strength in export commodity prices.

The New Zealand economy’s recovery from the stagnation of the last two years will remain patchy until mid-2025, according to Infometrics’ latest forecasts. Although the Reserve Bank’s interest rate cuts since August have finally provided some light at the end of the tunnel for Kiwis, continued increases in the unemployment rate will mean households remain cautious in their spending decisions over the next nine months. The high proportion of mortgage lending on fixed rates also means that the easing in monetary conditions will not have an immediate effect on household budgets.

Economic pressures are getting real for people this year, as higher mortgage rates continue to suck more money out of household budgets, and a swathe of recent job losses undermine income security.

New Zealand entered its first non-lockdown recession since 2010 in the March 2023 quarter, with GDP shrinking 0.1%, following a 0.7% contraction the previous quarter. Although this slight decline in GDP confirms that the Reserve Bank’s interest rate rises are having their desired effect, the range of results across different industries shows that some parts of the economy are hurting more than others.

Over the last two years, consumers have experienced high inflation across a wide range of goods and services. Car owners, and prospective buyers, are no exception, as vehicle-related prices have risen strongly since the start of the COVID-19 pandemic.