New Zealand's economic outlook brightens amidst global uncertainty

Kiwibank, Westpac predict recovery amid interest rate cuts

New Zealand's economic outlook brightens amidst global uncertainty

The latest tariff announcements by US President Donald Trump have caused significant ripples through global financial markets, illustrating a scene described by Kiwibank’s chief economist, Jarrod Kerr (pictured left), as akin to a thriller film.

In a sudden twist, tariffs planned for Canada and Mexico were pushed, pulled, and then reset to the original imminent dates, creating market confusion and uncertainty.

This uncertainty was compounded by a fiery confrontation between Trump and Ukraine’s President Volodymyr Zelenskyy, affecting global market stability, driving investors towards safer assets, and impacting US Treasury yields.

Kiwibank observes economic resilience amid challenges

Despite international disruptions, New Zealand’s domestic economic landscape shows resilience.

Kerr noted a mix of positive high-frequency data points and partial GDP indicators that suggest potential economic stabilisation.

Consumer and business confidence have seen upticks, suggesting an improving economic atmosphere.

Moreover, employment figures from Stats NZ indicated a rise in filled jobs, albeit with some sectors like construction and tourism experiencing fluctuating job numbers.

Westpac echoes Kiwibank’s positive economic forecast

Complementing Kiwibank’s analysis, Westpac provided further insights into New Zealand’s economic conditions.

According to Westpac senior economist Satish Ranchhod (pictured right), household spending is recovering, bolstered by rising consumer confidence and a noticeable increase in retail spending.

This recovery in the household sector is supported by recent interest rate reductions, although the full benefits are yet to materialise as many mortgages are yet to be re-fixed at lower rates.

Additionally, Ranchhod highlighted that while some businesses reported tough trading conditions, there is a general sense that the market has stabilised.

He pointed out that rural confidence is improving, driven by rising commodity prices, particularly in the dairy sector, which is predicted to hit record highs.

Cautious optimism amid global uncertainties

Both Kiwibank and Westpac emphasise cautious optimism for New Zealand’s economic trajectory despite global uncertainties.

The upcoming months will be critical as businesses and consumers alike navigate the changing economic policies and their implications.

The anticipated further rate cuts by RBNZ could provide additional stimulus to bolster economic recovery, aligning with the positive trends noted in recent high-frequency data.

Read the full Kiwibank report and access the Westpac report for more insights.