The last 12 months have been a grind for households and businesses. Tight budgets, high interest rates, and rising costs made life tough. But economists say relief may finally be in sight — especially in 2026.
Westpac’s chief economist Kelly Eckhold says the economy could grow by around 3% in 2026, a big jump from a flat 2025.
The reason? Lower interest rates and broader growth across the economy — not just farming and tourism, but also services and city-based industries.
Wages may take time to rise, but inflation is expected to ease.
Translation: the cost-of-living squeeze should slowly start to loosen.
Infometrics forecaster Gareth Kiernan agrees the outlook is improving.
Export prices have been strong, interest rates are falling, and the government is finally spending more on infrastructure.
“It can’t really get worse,” he says — but global risks like trade tensions and tariffs remain something to watch.
There are also early signs the job market is picking up, bringing a bit more optimism — this time with actual growth behind it, not just confidence surveys.
Fitch Solutions (BMI) predicts 2% growth in 2026, helped by:
-
Further Reserve Bank rate cuts
-
Big infrastructure projects like City Rail Link, highways, and water upgrades
-
Strong demand for dairy, meat, and a tourism rebound
But risks remain: global trade shocks, a slow recovery in China, labour shortages, and sticky inflation could all slow things down.
Simplicity economist Shamubeel Eaqub is the most optimistic — but with a reality check.
Yes, the economy is likely bottoming out.
But not everyone will feel the recovery equally.
“There’s been a real expansion of poverty,” he says.
Low-wage workers, renters, and people in struggling industries may continue to feel the pressure — even as the wider economy improves.
The real recovery moment?
When banks start lending again and businesses begin investing. That’s when growth really kicks in.
Add to that government infrastructure spending, which is finally ramping up again, and 2026 could look very different from the past two years.