New Zealand Institute of Economic Research (Inc)
Media Release, 14 October 2026
For immediate release
New Zealand’s economic recovery is resuming, but remains fragile and uneven, according to a new NZIER Insight released today. The Insight examines the key economic challenges facing the next Government, including weak household demand, still-soft business activity, elevated inflation, fiscal constraints, and the need to support stronger productivity growth over the longer term.
“Recent data suggest confidence is improving and there are some encouraging signs in parts of the New Zealand economy, but the recovery has not been broad-based,” says NZIER Senior Economist Ting Huang. “Although business confidence has improved markedly and firms are starting to feel more positive about hiring and investment, actual activity remains soft, and households continue to face headwinds from higher living costs and a soft labour market.”
The latest NZIER Quarterly Survey of Business Opinion (QSBO) shows a marked lift in business confidence in the September quarter, alongside an improvement in hiring and investment intentions. However, firms’ own domestic trading activity remained subdued, and firms continued to report weak profitability and lack of demand as the key concern for their business in the September quarter. This highlights the gap between improving expectations and still-soft underlying activity.
There are also signs that parts of the economy are improving. Exports have remained an important support for New Zealand’s economic recovery, led by stronger dairy and meat exports. Construction activity also increased strongly in the June quarter. In the NZIER QSBO, building sector firms reported an improvement in demand in the September quarter, consistent with the rise in building consent issuance in recent months. However, the NZIER QSBO architects’ measure of work in their own office still points to a soft construction outlook over the next 24 months.
Inflation is another key challenge. Headline inflation continued to rise following the earlier fuel shock, although underlying inflation pressures remain relatively contained. The latest NZIER QSBO offers some reassurance, with both cost and pricing indicators easing in the September quarter. However, renewed increases in global oil prices remain a key upside risk to the inflation outlook, particularly if higher fuel prices spill over into broader price- and wage-setting behaviour.
“For the next Government, this creates difficult policy trade-offs,” says Huang. “Fiscal choices remain constrained by both the inflation outlook and the Government’s fiscal position, while measures that materially increase aggregate demand could add to inflation pressures.”
The Insight also highlights the importance of longer-term productivity growth. Weak investment and uneven adoption of new technology have contributed to New Zealand’s longstanding productivity challenge, while infrastructure investment will need to be carefully targeted to areas that address genuine constraints and deliver value for money.
“Stronger productivity growth is ultimately what will provide greater scope for sustained increases in real incomes and living standards. The challenge is to create an environment that gives firms the confidence to invest while ensuring that limited public resources are directed towards areas that support long-term growth.”
For further information, please contact:
Ting Huang
Senior Economist
027 266 0969 | ting.huang@nzier.org.nz
