Swedes arrive as new RBNZ Governor eyes transparency shift
Kiwibank chief economist Jarrod Kerr (pictured) says New Zealand’s economy looks to have turned a corner heading into 2026, as falling interest rates and stronger building activity signal a tentative recovery.
Economy shows signs of a third-quarter rebound
“The end of 2025 is fast approaching. And just in time for 2026, it looks like things are turning,” Kerr said. “The September quarter looks to have been a strong one for the Kiwi economy.”
He noted this strength follows “a very weak starting point” and that the June quarter’s 0.9% decline in activity may yet be revised higher. Even so, Kerr said “recent dataflow has been pointing to strong improvement in economic output over the third quarter of this year.”
Building activity lifts as consents point to more to come
The latest positive signal came from Stats NZ’s building activity data. The volume of building activity rose 1.5% over the September quarter, beating market expectations of a 0.2% lift. Growth was driven by a 2.8% rise in residential volumes.
Non-residential activity fell 1.3% over the quarter, marking a fifth straight quarter of declines for the sector, but Kerr said overall construction looks to have stabilised.
“Altogether, building activity appears to have found a floor,” he said.
Building consents, which lead actual activity, “remain around 25% below from their 2022 highs, but have been on a general upswing since the middle of the year.”
Kerr said the fall in interest rates over the past year and expectations of a housing market recovery are likely supporting the improvement.
Retail and rate-sensitive sectors start to respond
The stronger building data follow a solid retail sales print for the September quarter and evidence of robust November spending, including over the extended Black Friday sales period.
“It’s great to see the interest rate sensitive sectors of the economy finally responding,” Kerr said. “Overall, things are looking brighter as we wrap up the year and head into 2026. And it’s thanks to the steady decline in interest rates since last year. The medicine of lower interest rates is working.”
IKEA opens as Swedish economist takes the RBNZ helm
Kerr also highlighted a light-hearted coincidence involving Sweden and New Zealand’s economy.
“But maybe the arrival of the Swedes helps too…” the Kiwibank economist said.
Swedish furniture giant IKEA opened in Aotearoa in the same week that Swedish banker and economist Anna Breman took up her role as governor of the Reserve Bank (RBNZ).
Appearing before Parliament’s Finance and Expenditure Committee last Tuesday, Breman’s first remarks as governor underscored the central bank’s focus on its core mandate: keeping inflation low and stable. She also emphasised a push for greater transparency and openness at RBNZ.
One option she signalled was introducing voting attribution for monetary policy decisions. Breman told MPs it was something she would like to discuss with other Monetary Policy Committee members over time, leaving the door open to possible changes in how decisions are reported.
Read the full Kiwibank insights here.
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