Survey data shows firms upbeat, but operating pressures linger
New Zealand’s business community is showing renewed confidence as the nation adjusts to a shifting monetary policy landscape, with the Reserve Bank of New Zealand poised to deliver further interest rate relief next week.
Business confidence has improved following the RBNZ’s 50 basis point cut to the Official Cash Rate (OCR) in October, according to recent survey data.
The ANZ Business Confidence index reached 58.1 in October, marking a substantial lift in general sentiment, Westpac reported. However, the response to monetary easing has been measured, with more detailed survey questions showing only modest gains alongside the headline improvement.
The confidence survey has remained elevated throughout 2025, experiencing only minor disruption from external factors such as trade policy announcements earlier in the year.
Despite optimism about future prospects, firms continue to report challenging current operating conditions, with year-on-year comparisons becoming increasingly difficult as the recovery that began in late 2024 matures.
Central bank set to continue easing cycle
Economists widely expect the RBNZ to reduce the OCR by 25 basis points to 2.25% at next week’s policy meeting, the final rate decision of 2025. The anticipated cut would maintain the central bank’s modest, data-dependent easing approach as policymakers assess the balance between supporting economic growth and managing inflation expectations.
The decision comes as the RBNZ evaluates persistent excess capacity in the economy and monitors the short-term inflation trajectory. While some monetary policy committee members may favour more aggressive easing, the consensus appears to support a cautious path forward.
Retail spending maintains gradual recovery
Consumer spending has shown resilience through the middle months of 2025, with retail sales volumes rising 0.5% in the June quarter. Westpac economists forecast continued growth of 0.6% for the September quarter, including a 0.4% increase in core categories excluding fuel and motor vehicles.
However, recent monthly updates suggest momentum in consumer spending has moderated as 2025 draws to a close. The slower pace raises questions about the sustainability of the recovery in household consumption, particularly as cost pressures and pricing measures in business surveys have remained relatively stable over the past year.
Confidence challenges persist despite policy support
Consumer confidence remains subdued at 92.4, indicating households continue to exercise caution despite falling interest rates. The persistent weakness in consumer sentiment, combined with reports of difficult current trading conditions from businesses, highlights the ongoing nature of New Zealand’s economic adjustment, according to economists.
The depreciation of the New Zealand dollar adds another dimension to the outlook, with potential implications for inflation as import costs rise.
