Surveys, job data, and consents point to gradual upturn
New Zealand’s recovery is starting to show through in the data, with Westpac pointing to stronger business sentiment, early signs of labour market stabilisation and a lift in building activity.
Westpac’s more upbeat read on current activity echoes ASB’s recent commentary, which argues that “momentum is building” and that 2026 “holds the most promise in a number of years”, even if growth is still constrained by global and political risks.
“The highlight of the week was the NZIER’s Quarterly Survey of Business Opinion, which showed a more upbeat attitude among businesses than we’ve seen for some time,” said Westpac senior economist Michael Gordon (pictured). “General business sentiment rose to +39% in December from +17% in September, marking the highest reading since March 2014.”
In terms of their own performance, “a net 23% of firms expected an improvement over the coming quarter, compared to 10% in September.”
Gordon noted that backward‑looking measures in the survey, which have been more subdued than forward‑looking ones in recent quarters, also picked up and are consistent with Westpac’s forecast of a 0.5% rise in December‑quarter GDP, lifting annual growth to 1.7%.
Jobs market shows early signs of stabilising
The QSBO suggests the labour market is beginning to turn as business activity picks up.
“A net 2% of firms reported an increase in staff numbers, the first positive result in two years. Moreover, hiring intentions for the next quarter rose from 7% to 15%,” Gordon said, adding that firms are again finding skilled workers harder to source.
Supporting this, the MBIE Jobs Online report showed job advertisements in December were up 10% on a year ago, although still below pre‑COVID levels. The Westpac‑McDermott Miller Employment Confidence Index also rose 3.9 points to 93.8 in December, its highest reading since early 2024.
Gordon said this provides “some support to our view that the current unemployment rate of 5.3% is at its peak or at least very close to it.”
Monthly tax‑based data tell a similar story, with the Monthly Employment Indicator reporting a 0.3% rise in filled jobs in November – “the most positive month since April 2023” outside an election‑related blip. Westpac expects this to be revised lower but still see it as an improvement on the sustained falls from early 2024 to mid‑2025.
“Getting positive signals from three different angles – businesses, households, and tax data – gives us more confidence that the pickup in the jobs market is genuine,” Gordon said, while cautioning that unemployment typically turns only gradually.
Low rates now ‘stimulatory’ but inflation still at 3%
Westpac says the latest data confirm that “monetary policy is now well into stimulatory territory,” with low interest rates encouraging developers and supporting demand.
Residential building consents rose 2.8% in November, lifting the 12‑month total to just under 36,000 – “the highest in over a year”.
However, Gordon warned that the upturn is arriving with inflation already at the top of the Reserve Bank’s target band.
“We’ve revised up our forecast to a 0.5% increase in the CPI for the December quarter. This would see annual inflation hold at 3% for a second straight quarter, right at the top of the RBNZ’s 1-3% target range.”
Despite that, Westpac still expects inflation to ease over 2026 as housing‑related inflation, wage pressures and food prices moderate, reducing pressure on the Reserve Bank for early rate hikes.
“If we’re right, that will remove any pressure on the RBNZ for an early tightening to keep inflation expectations in check, and instead allow it to normalise policy gradually based on a forward-looking view of inflation.”
Stay informed with the latest housing market trends and mortgage insights — subscribe to our free daily newsletter.
