NZ Economy Resilient Despite Global Shocks
New Zealand's economy is proving resilient despite global shocks, but the Reserve Bank is pushing ahead with further rate hikes to tame stubborn inflation.
According to Westpac's latest economic overview, growth was flat in the June quarter due to the Middle East conflict weighing on confidence and household spending. However, signs of a turnaround are emerging, with Westpac chief economist Kelly Eckhold noting that 'looking forward, we see signs the economy is shaking off these uncertainties, with growth appearing to have resumed in the current quarter.'
The bank expects GDP growth of 2.1% over 2026 and 3% in 2027, with unemployment easing to 4.9% by the end of next year. However, household finances remain under strain, with disposable incomes rising just 3.8% in the year to March and wages and salaries growing only 0.4%, well below inflation.
The Reserve Bank is on track to reach a neutral OCR of 3-3.25% by year-end, but Westpac expects it will need to go further, assuming a higher 3.75% neutral rate.