Infometrics Doubles New Zealand's 2026 Growth Forecast as Farm Exports and Lower Rates Fuel Optimism

In a bold revision of its economic outlook, Infometrics has more than doubled its growth forecast for New Zealand’s economy by 2026, citing a combination of strong farm exports, lower interest rates, and a more stable global trade environment as the main drivers of this optimism.

A Gradual Recovery with Strong Rural Momentum

According to Infometrics, the recovery will be a “pre-nineties style” one, where rising farm incomes due to high export prices will gradually filter through to regional economies and eventually the main cities. This is expected to lead to stronger household spending as debt servicing costs decline due to lower interest rates.

Chief forecaster Gareth Kiernan explained that while the overall growth is expected to be around 2.1 percent annually over the next five years, the recovery will be uneven. Southern rural areas are likely to outpace urban centers, with Auckland benefiting more from lower rates and government infrastructure spending. However, Wellington is expected to struggle due to public sector job losses.

Unemployment and Caution Remain Key Concerns

Despite the positive outlook, Kiernan warned that unemployment is expected to peak at 5.3 percent later this year, which could temper consumer confidence and household spending. However, the forecast suggests that by 2026, household spending is likely to grow at a rate of 2.8 percent annually, driven by improved economic conditions and lower borrowing costs.

Tariffs and Global Trade: Less of a Concern Than Expected

While trade tensions with key partners like the United States and China remain a concern, Kiernan noted that their impact on New Zealand’s exports has been less severe than initially feared. International financial markets have also become more optimistic about the global economic outlook, reducing the perceived threat of tariffs.

“The negative effects on exports look likely to be less critical than initially feared,” Kiernan said. “International financial markets have shaken off the worst of their fears and are becoming less pessimistic about the outlook for growth.”

Regional Disparities and Long-Term Outlook

Infometrics highlighted that while the overall economy is expected to grow steadily, individual regions will take time to return to previous levels of prosperity. Per capita economic growth is expected to take at least two years to reach previous highs, with rural areas recovering more rapidly than urban centers.

Despite the recent slowdown in economic momentum, with some data suggesting a contraction in the past three months, the long-term outlook remains positive. The consultancy sees a strong foundation for recovery, particularly in the agricultural sector, which is expected to remain a key pillar of economic growth for years to come.

Conclusion

As New Zealand navigates a complex economic landscape, the revised forecasts from Infometrics provide a cautiously optimistic view of the future. With strong export revenues, lower borrowing costs, and a more stable international trade environment, the path to recovery, though uneven, appears to be taking shape.