Tourism-led uptick masks weak private demand and soft construction pipeline
New Zealand’s economy inched forward at the end of 2025, with GDP up 0.2% in the December quarter, signalling a patchy recovery that is unlikely to ease pressure on borrowers’ budgets or materially lift borrowing capacity in the near term.
“GDP has now risen in three of the last four quarters,” said Jason Attewell, Stats NZ general manager and macroeconomic spokesperson, in a media release. Annual growth has returned for the first time since late 2024, but GDP per capita was flat as population gains absorbed the headline rise.
Tourism and services carry the load
The December quarter was driven by services, especially sectors tied to tourism. Rental, hiring, and real estate services rose 0.8%, while retail trade, accommodation, financial services, and arts and recreation all posted solid gains.
“Spending by overseas visitors to New Zealand increased in the December 2025 quarter, contributing to a 7.8% rise in travel services exports,” Attewell said.
ASB economists likewise highlighted that tourism-related spending underpinned much of this services strength, contributing to a 0.7% lift in overall services activity.
This rebound supports regional economies and hospitality‑linked employment, which can help stabilise household incomes for some borrowers. However, it does little to revive the construction pipeline that underpins new housing supply.
Construction output fell 1.4% in the quarter, with non-residential building particularly weak.
Weak private demand, uncertain rate outlook
Both Westpac and ASB described the recovery as uneven.
ASB’s Kim Mundy said the data show “the economy was still fragile, with private demand noticeably lacking from the equation.” Household consumption slipped 0.1%, and business investment fell, underlining cautious sentiment.
Westpac’s Michael Gordon noted that while the economy was gaining some momentum before the latest oil shock, it was “still barely at a pace that would have halted the rise in unemployment or added to domestic inflation pressures.”
With geopolitical tensions pushing up fuel costs and keeping inflation sticky, the Reserve Bank is likely to remain wary about cutting mortgage rates quickly.
For more insights, read the Westpac and ASB commentaries.
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
