Infometrics says strong export incomes will be a key driver in New Zealand's economic recovery. (File photo) Photo: Unsplash/ Jakub Żerdzicki
- Economy to perk up gradually, edging to 2 percent next year - Infometrics
- Farm exports, lower rates to drive growth, tariffs not such an issue
- Growth uneven - stronger in southern rural economies
Surging farm exports, lower interest rates, and less worry about tariff turmoil has led economics consultancy Infometrics to double its growth forecasts for the economy.
In its latest set of forecasts it has taken a slightly more upbeat view of the recovery.
"Strong export incomes, particularly across the agricultural sector, will be a key driver of New Zealand's economic recovery over the next 18 months," chief forecaster Gareth Kiernan said.
He said the recovery would be an "old-fashioned pre-nineties style", with farmers' incomes boosted by high export prices, eventually flowing through to provincial cities and then the main cities.
Lower interest rates would also stimulate household spending as debt servicing costs fell, but caution would remain because of a soft jobs market, with unemployment set to peak at 5.3 percent later this year.
"This will help cement a recovery in household spending towards 2.8 percent a year growth during 2026," he said.
But Kiernan said the recovery would be uneven as southern rural areas outpace the main centres.
Infometrics chief forecaster Gareth Kiernan said economic recovery would be uneven across the country. (File photo) Photo: RNZ / Rebekah Parsons-King
Auckland would benefit sooner from lower rates and government infrastructure spending, but Wellington would continue to struggle as it absorbed public sector job losses.
Growth was forecast to average 2.1 percent a year over the next five years, but individual shares of the economic - the per capita measure - will take at least two years to previous highs.
The economy posted six months of solid growth at the end of last year and the start of this year.
However, recent data has suggested the economy has run out of steam in the past three months, possibly even contracted.
Not so worried about tariffs
Kiernan said fears about the outlook for New Zealand's two biggest trade partners - United States and China - have not disappeared but did not seem so threatening.
"The negative effects on exports look likely to be less critical than initially feared.
"International financial markets have shaken off the worst of their fears and are becoming less pessimistic about the outlook for growth."
Kiernan said the greater worry about tariffs was the impact on New Zealand's trading partners, which face higher levels of levies, and the associated impact on global growth.
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