Five reasons to feel positive about the New Zealand economy

It's been a year of grim economic news - unemployment has been up, [It's been a year of grim economic news - unemployment has been up, GDP down and consumer confidence weak GDP down and consumer confidence weak.

But nothing lasts forever and economists say there are a number of reasons to feel positive about the economic outlook right now.

1. The official cash rate has dropped

Kiwibank chief economist Jarrod Kerr said the fact that the official cash rate had fallen to the level where it was stimulatory for the economy would be a gamechanger.

"People often say to me 'there's been 250 basis points of cuts, it's not working'… it's like yeah because it only took it back to a neutral setting at 3 percent. [At 2.5 percent], now we've actually gone into stimulatory territory.

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"If the theory holds, which it will, interest rates will get to a level that actually entices people again, namely investors and developers and businesses, and households with debt will feel a lot better today than they did six months ago."

Infometrics chief forecaster Gareth Kiernan agreed interest rates would be a big factor. "People can have a degree of certainty that they will remain that way throughout 2026, which should generate more confidence among households about spending."

ANZ senior economist Miles Workman said the Reserve Bank had also indicated it would backstop the recovery. "They're working out what level of interest rate that's going to take but they are going to get that right eventually. I think we should have confidence there is a recovery occurring."

Mike Jones, BNZ chief economist, said the Reserve Bank's apparent willingness to keep cutting if it needed to would help.

2. Job ad numbers have increased

After a very significant fall, the number of advertised jobs increased across both July and August for the first time in more than three years.

"Job numbers have managed three positive months for the first time since mid-2023," Kiernan said.

"Noting that two of those job number increases were 0.02 percent and 0.03 percent, so are barely positive and could easily be revised negative; nevertheless it's the best sign of any emerging turnaround in the labour market we've had so far."

3. Commodity prices are strong

Dairy, meat and horticulture prices are still at strong levels.

"Primary sector export returns have been stellar over the past year. While not every sector has enjoyed strong gains, the sector heavy weights have driven overall agricultural exports to $53.0 billion in the year to August 2025, some $7.5b higher than a year earlier," Jones said.

"That's facilitated a range of options including paying down debt and rebuilding buffers. More recently we've seen perhaps the first signs of some movement toward spending and investing."

Kerr said US President Donald Trump's tariffs had not hurt. "There's no doubt there was a period of extreme volatility in markets and that might have frightened a few business owners… they simply just turned out to be a whimper… he surprised us by coming out with these massive numbers but he's negotiated all the way down to 10 percent to 15 percent anyway... it's not a big deal.

"The exporters I've spoken to who export into the United States, they're not worried at all. The Kiwi dollar's declined so that's taking some of the pain.

"We export meat, Americans love meat. I can't see them giving that up. They like our wine. We're exporting the right goods which Americans will probably happily pay 15 percent on."

He said there would be more pass-through from farmers to the broader economy next year.

Workman agreed the rural economy was very strong. "A lot of the moderation that we've seen in dairy prices is partly driven at least by the fact that New Zealand supply is on the rise. So that's not necessarily going to be a bad news story for overall rural incomes if the volumes are lifting to offset any minor falls in prices."

Thanks to those higher commodity prices and a New Zealanders spending less money on international imports, the country's terms of trade (a measure of imports versus exports) has improved significantly.

"That's narrowed a lot," Workman said. "The upshot is New Zealand's a lot less vulnerable to global credit pulling the plug on us. So it's a lot more sustainable from a creditworthiness perspective and that has positive implications for our sovereign credit rating, risk premiums on interest rates when we borrow offshore, that kind of thing."

4. Spending is up a bit

Kiernan said core retail electronic card sales had increased 1.7 percent over the past three months, with three consecutive monthly increases, which was the best result since the December quarter last year.

Simplicity economist Shamubeel Eaqub and Kerr said they expected to see more government spending next year, too, because it was an election year. "Noises are building of more spending on maintenance, capital expenditure," Eaqub said.

5. Every cycle turns eventually

We were surviving until 2025 and now we're staying in the mix until 2026... but eventually things will just get better.

Eaqub said there would always be an end to every downturn. "It's easy to get trapped in negative thinking."

He said it was important to remember that about a third of households still said they were better off than a year ago.

While things overall were bad, there were people doing well and businesses succeeding. "Some people are getting ahead. We hear about businesses closing but the total number of businesses is higher than it's ever been."

Workman said there was no underlying global crisis to interfere with New Zealand's return to economic health.

"If you think about the GFC (global financial crisis), it wasn't just a demand and confidence shock, it was also a bit of a credit availability shock and that's not really happening right now.

"If the demand is there, the credit availability is there. There are no major handbrakes on that front. Broader economic conditions are in place for a recovery."

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