New Zealand business confidence nears 12-year high on rate cuts
The Reserve Bank of New Zealand has cut its Official Cash Rate by 325 basis points since August 2024
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[WELLINGTON] New Zealand business confidence surged to the highest in almost 12 years as aggressive central bank rate cuts spark an economic recovery.
A net 48 per cent of firms expect the economy to improve in the next 12 months, the New Zealand Institute of Economic Research (Nzier) said on Tuesday (Jan 13) in Wellington, citing its fourth-quarter survey of business opinion. That’s up from 18 per cent in the third quarter and the highest read since the first quarter of 2014.
The Reserve Bank of New Zealand RBNZhas cut its Official Cash Rate (OCR) by 325 basis points since August 2024 and has signalled it is on hold, giving businesses confidence to hire and invest. Gross domestic product surged 1.1 per cent in the three months to September and is projected to continue growing to 2026.
“The latest results suggest that New Zealand’s economic recovery is starting to take shape as the effects of lower interest rates flow through to the broader economy,” Nzier principal economist Christina Leung told a briefing. “There are signs that the recovery is gaining traction.”
A net 3 per cent of firms experienced a decline in their own trading activity in the final three months of 2025, while hiring increased in the quarter for the first time in two years.
A net 23 per cent of firms said that they expected their own trading to improve in the three months to March, while firms are more confident in hiring and investment. A net 22 per cent plan to increase staff numbers and a net 7 per cent expect to increase investment in plant and machinery.
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Still, there are early signs of capacity pressures emerging as demand grows, which may put pressure on prices and require a monetary policy response, Leung said.
There are some signs of a tighter labour market, with a net 2 per cent finding it harder to get skilled workers and 8 per cent of firms reported that finding labour was the biggest constraint on growth, up from 4 per cent in the third quarter, she said.
“We are starting to see pockets of capacity pressure coming through,” Leung said. “If we were to get demand continuing to strengthen and outpace capacity in the economy over the longer term, I would say it poses upside risk to inflation.”
For now, inflation pressures are contained and Leung expects the RBNZ will hold the OCR at 2.25 per cent through the first half of 2026 before beginning to raise interest rates in the second half. BLOOMBERG
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