Oil shock threatens rates and demand
New Zealand’s economy is expected to have expanded modestly at the end of 2025, with major banks forecasting quarterly GDP growth of around 0.3–0.4% when Statistics New Zealand releases the latest round of data on Tuesday.
ASB senior economist Kim Mundy expects production GDP to have grown 0.4% quarter‑on‑quarter in Q4, leaving the economy about 1.7% larger than a year earlier.
On a per‑capita basis, ASB estimates GDP rose 0.2%, the second consecutive increase after a long period of decline.
Mundy notes that growth is being supported by agriculture and services, with “New Zealand’s key good news stories of late” centred on a solid export sector, high commodity prices, and a pick‑up in tourism activity.
Westpac is also looking for a 0.4% rise in the December quarter and similarly emphasises the return to per‑capita growth, arguing that this would mark the first year of gains since 2022.
Its economists say the data should give a “relatively clean read” on underlying momentum, with broad‑based gains across primary industries, wholesale trade, tourism‑linked sectors and rental, hiring and real estate, partly offset by weakness in construction and food manufacturing.
Kiwibank’s team is slightly more cautious, pencilling in 0.3% growth for the quarter and 1.5% over the year. They characterise the release as “one of the most dated GDP report cards in recent memory”, stressing that the real story now is the potential demand shock from higher oil prices and more expensive international travel.
Tourism and real estate hold up as construction lags
All three banks highlight tourism as a key bright spot. ASB points to a 4.4% quarterly lift in overseas arrivals and the strongest annual visitor numbers since before COVID‑19, while Kiwibank expects sectors such as transport, arts and recreation, retail trade, and accommodation to make some of the biggest contributions to Q4 growth.
Kiwibank also reports strength in rental, hiring and real estate services, underpinned by an almost 6% seasonally adjusted jump in house sales over the quarter.
By contrast, construction remains a clear drag, with non‑residential work falling sharply and total building activity down in Q4. That combination – firmer tourism and housing turnover but weak building pipelines – suggests brokers may continue to see patchy credit demand across regions and borrower types.
OCR outlook: still easing, but timing in play
ASB reiterates that GDP alone is unlikely to shift the Reserve Bank’s official cash rate track, given how much has changed since Q4. The bank still expects RBNZ to start “normalising policy by the end of 2026,” but warns that upside risks to inflation from spiking oil prices could affect the timing of cuts, depending on how growth, wages, and price‑setting behaviour evolve.
For more information and insights, read the Westpac, ASB, and Kiwibank reports.
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