Westpac says OCR hikes likely on hold until late 2026
Westpac economists say New Zealand’s economy enters 2026 “at a turning point”, with the full impact of last year’s monetary easing still to flow through.
“There’s been a significant easing in monetary policy over the past year, the full impact of which is yet to be felt,” wrote senior economists Satish Ranchhod and Michael Gordon (pictured left to right). As lower interest rates work through, they expect “economic conditions and the labour market gradually firming”, noting “we’ve already started to see spending picking up.”
Even so, they warn the recovery is uneven, with unemployment still elevated, cost‑of‑living pressures squeezing households and the housing market “flat… at least in the near term”.
RBNZ pushes back on early hike expectations
Markets briefly moved to price in earlier OCR hikes after the Reserve Bank’s easing cycle ended late last year, but Governor Anna Breman has stepped in to cool expectations.
She stressed that “financial conditions have tightened relative to the assumptions embedded in the November MPS forecasts, and that there is still a lot of water to go under the bridge before OCR increases come into view.”
In one interview she added: “…given that we see inflation also falling and being low and stable going forward, it's very important now that we see growth that's lasting, that we see that we have a period where growth is coming back.”
Westpac still expects just one rate hike in 2026, pencilled in for December after the General Election, with gradual moves after that.
Growth and inflation surprises reduce odds of further cuts
September quarter GDP rose 1.1%, at the top of market forecasts and ahead of the RBNZ’s projections, suggesting “less spare capacity in the economy than they had anticipated”.
Stats NZ figures show the rebound was broad‑based, with 14 of 16 industries expanding and expenditure‑side GDP up 1.3% on the back of stronger exports and a 3.2% lift in business investment.
Westpac now sees inflation easing gradually from 3% year‑on‑year and back comfortably inside the RBNZ’s 1–3% band by mid‑2026, helped by soft rents and slowing construction costs.
Flat housing market, more stock and choice for buyers
For advisers, the standout is a soft housing market despite lower mortgage rates. Sales fell 3% in November and prices slipped 0.3% (seasonally adjusted), with the national market “flat since mid‑2023”.
Westpac links that to a sharp rise in listings: adjusting for seasonality, “the number of homes available for sale is at its highest level in a decade.”
New figures from realestate.co.nz back that up, showing 30,390 properties listed for sale in December – up 3.1% year-on-year and the highest December stock level in 10 years – with more than 30,000 homes on the market every month of 2025. National values slipped 1% over the year, leaving the median at $808,430 and still well below the early‑2022 peak.
With RBNZ signalling that the rate‑cut cycle is likely over, Westpac expects “only modest house price growth” over the year ahead and says the risks are still “tilted towards continued softness in the housing market, at least in the early part of the year.”
For Kiwi advisers, that points to a 2026 market where buyers have more choice and negotiating power, but vendors and investors will need realistic pricing and tighter cash‑flow management.
Access the Westpac report here.
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