Household spending outlook brightens despite weak investment
The latest NZIER Consensus Forecasts point to a weaker growth path for the year ending March, with GDP expected to rise just 1.5%.
That’s down from earlier projections, reflecting the subdued conditions seen in recent business surveys such as NZIER’s Quarterly Survey of Business Opinion (QSBO).
Forecasts show growth picking up to 2.8% in 2027 as the full impact of lower interest rates feeds into the economy.
ASB and Westpac economists also expect GDP to have shrunk in the June quarter, highlighting that the weakness may look worse on paper than in reality. Both banks continue to forecast further OCR cuts, keeping relief in sight for households and mortgage borrowers.
Household spending expected to recover
NZIER noted an improvement in the outlook for household spending. The volume of retail sales has increased gradually in recent quarters, and with about 77% of mortgages due for repricing within the next 12 months, repayments are expected to fall further for many households.
“This is expected to support a continued recovery in households’ discretionary spending,” NZIER said.
Housing investment outlook weakens
While the overall investment outlook for 2026 and 2027 has improved, the picture is less positive for housing.
“The residential investment outlook for the coming year deteriorated,” the report said. “This is broadly in line with architects’ expectations of a reduced near-term pipeline of housing construction work, as shown in the NZIER QSBO.”
Weakness in housing market activity remains a drag on residential investment growth.
Export growth revised lower
Forecast export growth has been trimmed for 2026, with global dairy production rising and concerns about the US trade outlook dampening global demand, particularly from China.
“Global dairy prices have declined from a historically high level in recent months, mostly due to increased global dairy production. This is weighing on the export growth outlook over the coming year,” the report said.
Exports are expected to bounce back in 2027, supported by strong global demand for food commodities.
Exchange rate outlook
The NZ dollar trade-weighted index (TWI) has been revised higher for 2026 but lower for subsequent years. RBNZ’s rate cuts have weighed on the currency, but the slowing US economy and fiscal uncertainties are limiting the appeal of USD-denominated assets.
The TWI is forecast to hover between 69.7 and 71.2 through the period.
Inflation steady, interest rates to fall further
Inflation forecasts remain broadly unchanged. While CPI has edged up on strong commodity prices and unseasonal weather affecting food costs, NZIER said excess capacity in the economy should pull inflation back toward the RBNZ’s 2% target midpoint.
“The interest rate outlook has been revised lower for 2026 and 2027,” it said. “This revision reflects the RBNZ’s dovish tilt in its August Monetary Policy Statement, which indicated two further OCR cuts in this monetary policy easing cycle.”
Labour market remains soft
Wage growth forecasts were lifted slightly for 2026 but trimmed for 2027. The unemployment outlook remains broadly unchanged, with excess labour market capacity expected to weigh on wage growth in the short term before improving as economic activity recovers.
Read the full NZIER report for more information.
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