Economic outlook revised down, recovery expected in 2026

By earthnews
8 months Ago

Economic outlook revised down, recovery expected in 2026

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The economic outlook for the next 12 months has been revised down, though population growth is expected to support a recovery in 2026.

The Institute of Economic Research (NZIER) consensus forecasts indicate gross domestic product (GDP) for the year ended March 2024 has been revised down to 0.5 percent and to 0.8 percent for the year ending March 2025.

Household spending was expected to contract by 1 percent over the next 12 months, as about 50 percent of homeowners will need to reset their mortgages at higher interest rates this year.

NZIER senior economist Ting Huang said the downturn will coincide with a slowdown in the pipeline of residential construction and investment.

However, she said population growth should support an economic recovery in 2026, in line with an expecting easing in the Reserve Bank’s official cash rate.

The outlook for export growth was expected to also improve this calendar year as the global economy continued to return to growth. However, she said the outlook for imports remained weak.

The inflation outlook was broadly unchanged, with annual consumer price index (CPI) inflation forecast to ease to 4.2 percent this calendar year and to fall to 2.4 percent in 2025.

Huang said strong net migration inflows were a key risk to ongoing inflation, while tensions in the Red Sea may also present an upside risk for tradeable inflation, with global shipping costs under pressure.