{"id":17401,"date":"2026-05-13T05:11:34","date_gmt":"2026-05-12T17:11:34","guid":{"rendered":"https:\/\/thebuzz.apnanetwork.co.nz\/?p=17401"},"modified":"2026-05-13T05:11:34","modified_gmt":"2026-05-12T17:11:34","slug":"nz-economy-to-dodge-recession-but-faces-rocky-year-westpac","status":"publish","type":"post","link":"https:\/\/thebuzz.apnanetwork.co.nz\/?p=17401","title":{"rendered":"NZ economy to dodge recession but faces \u2018rocky\u2019 year – Westpac"},"content":{"rendered":"

New Zealand will avoid slipping into recession, but faces a difficult year of weak growth, rising unemployment and higher interest rates as global energy prices surge, according to Westpac’s latest\u00a0Economic Overview<\/i>.<\/p>\n

The bank said the Middle East conflict had driven a sharp rise in oil and fuel costs, hitting households and businesses and forcing a significant downgrade to the economic outlook.<\/p>\n

“The outlook for the economy has changed materially in recent months,” Westpac chief economist Kelly Eckhold said.<\/p>\n

“While we are not forecasting a recession, the economy has been knocked off course by a surge in fuel prices and heightened global uncertainty.”<\/p>\n

Westpac now expected economic growth of around 1.5 percent in 2026, describing it as another year of “sub par” performance as the recovery loses momentum.<\/p>\n

“We don’t expect a recession right now. Rather the view is that the Iran war will merely cause a pause in the economic recovery,” Eckhold said<\/p>\n

The bank expected stronger growth to return from 2027, but warned the outlook was highly uncertain and depended heavily on how long the conflict lasted.<\/p>\n

Inflation surge and higher interest rates<\/h3>\n

A key impact of the oil shock was a renewed lift in inflation, with higher petrol prices flowing through into a broad range of costs.<\/p>\n

\"Westpac<\/p>\n

Westpac chief economist Kelly Eckhold.\u00a0<\/span>Photo:\u00a0Supplied \/ LinkedIn<\/span><\/p>\n<\/div>\n

“The spike in fuel and other costs is driving a renewed lift in inflation pressures across the economy,” Eckhold said.<\/p>\n

Westpac expected annual inflation to rise into the 4 percent to 5 percent range over the coming year, remaining above the Reserve Bank’s target band until well into 2027.<\/p>\n

That was likely to force the Reserve Bank to begin raising interest rates.<\/p>\n

“Interest rates are set to rise – it’s a question of ‘when,’ not ‘if’ hikes occur,” the bank said.<\/p>\n

Westpac expected the Official Cash Rate to climb to around 3 percent by the end of 2026, with more increases in 2027.<\/p>\n

Households squeezed, spending slows<\/h3>\n

Rising living costs were expected to weigh heavily on households over the coming year.<\/p>\n

Fuel prices had jumped sharply since the conflict began, adding to earlier increases in essentials such as food and electricity.<\/p>\n

“Cost of living pressures have intensified,” the bank said, warning that household finances were coming under renewed strain and spending growth was set to slow sharply.<\/p>\n

Higher borrowing costs would also add to the pressure to household budgets, with mortgage rates likely to increase as interest rates rose.<\/p>\n

\"New<\/p>\n

Rising living costs are expected to weigh heavily on households.\u00a0<\/span>Photo:\u00a0123RF<\/span><\/p>\n<\/div>\n

Businesses were expected to respond to rising costs and uncertainty by pulling back on hiring.<\/p>\n

“Businesses are likely to shelve hiring plans while oil prices and uncertainty are elevated,” Eckhold said.<\/p>\n

Westpac expected the unemployment rate to rise to around 5.6 percent over the coming year as hiring growth stalled.<\/p>\n

Housing and investment hit<\/h3>\n

The housing market, which had shown signs of recovery earlier in 2026, was expected to lose momentum.<\/p>\n

House prices were forecast to be flat to slightly lower over the year, reflecting weaker confidence and rising interest rate expectations.<\/p>\n

“The housing market is unlikely to be a driver of growth for the coming year or so,” Eckhold said.<\/p>\n

Business investment and construction were also expected to slow, as firms delay decisions amid heightened uncertainty.<\/p>\n

Outlook depends on conflict<\/h3>\n

Westpac said the next steps for the economy would depend heavily on how events unfolded in the Middle East.<\/p>\n

A prolonged conflict would mean weaker growth and more persistent inflation, while a faster resolution would ease pressures sooner.<\/p>\n

“The economy is navigating rocky waters, with subdued economic growth, a soft labour market and high inflation,” the bank said.<\/p>\n

“Firms need to manage what they can control,” Eckhold said.<\/p>\n

RNZ<\/p>\n","protected":false},"excerpt":{"rendered":"

New Zealand will avoid slipping into recession, but faces a difficult year of weak growth, rising unemployment and higher interest rates as global energy prices surge, according to Westpac’s latest\u00a0Economic Overview. The bank said the Middle East conflict had driven a sharp rise in oil and fuel costs, hitting households and businesses and forcing a […]<\/p>\n","protected":false},"author":6,"featured_media":17402,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[222,174],"tags":[],"class_list":["post-17401","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-news","category-nz-news"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/posts\/17401","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=17401"}],"version-history":[{"count":1,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/posts\/17401\/revisions"}],"predecessor-version":[{"id":17403,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/posts\/17401\/revisions\/17403"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=\/wp\/v2\/media\/17402"}],"wp:attachment":[{"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=17401"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=17401"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thebuzz.apnanetwork.co.nz\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=17401"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}