NZ economy set for recovery in 2025 – but how fast?
New Zealand’s economy is expected to turn a corner in 2025, according to ANZ chief economist Sharon Zollner (pictured above), but the speed of recovery remains uncertain.
While falling interest rates and easing inflation pressures offer hope, the economy still faces challenges from previous disruptions.
“There’s light at the end of the tunnel,” Zollner said. “The big theme for 2025 is not if the economy is going to recover – hopefully that’s in the bag – but rather, how fast.”
Interest rates offer hope, but caution remains
With the Reserve Bank (RBNZ) expected to cut rates further in the first half of 2025, businesses and households will likely see relief. However, Zollner emphasised that RBNZ’s easing path is highly data-dependent.
“Now that interest rates are coming down, it’s very reasonable to hope and expect that 2025 will be a brighter year than 2024,” she said. “But there’s nothing set in stone about this easing cycle. The central bank will continue to watch the data very closely.”
Inflation remains a key factor to watch. While progress has been made, the ANZ economist noted that domestic inflation needs to stabilise at acceptable levels for a sustainable recovery.
Opportunities for the resilient
Zollner highlighted that cash flow will be a decisive factor in 2025. Businesses and households with low debt and strong balance sheets are well-positioned to seize new opportunities.
“Cash is king, and one firm’s challenges may very well be another firm’s opportunities,” she said.
Zollner said that whether you’re a business or a household, if you have cash and less debt, you’re in a position to take risks – whether that’s buying property, your competition, or premises.
However, recovery won’t be instant, particularly for sectors hit hardest by recent economic pressures, such as hospitality and retail.
A gradual path forward
While green shoots are emerging, Zollner cautioned that lingering damage from the past two years will take time to repair. ANZ Research expects the rate cuts in early 2025 to “sow the seeds of recovery” for the rest of the year.
“There is light at the end of the tunnel, but I think it could feel like a very long tunnel for those in sectors like hospitality or retail, who have had a really rough time of it,” she said.
Outlook for 2025
For businesses, governments, and households alike, 2025 will be about finding opportunities in a landscape that is still recovering. The combination of lower interest rates and easing inflation will help lay the groundwork for growth, but the pace of that recovery will depend heavily on resilience, strategy, and economic conditions throughout the year.
“So far, so good – but it’s definitely a must-watch,” Zollner said.
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