Source: BusinessNZ
The latest BusinessNZ Planning Forecast shows New Zealand’s economic outlook remains cautiously optimistic, but inflation, interest rates and business confidence remain closely linked to ongoing geopolitical tensions and rising business costs.
Chief Economist John Pask says while the reopening of the Strait of Hormuz and a ceasefire agreement between the United States and Iran are welcome developments, it would be premature to assume a return to normal conditions any time soon.
“Freight, transport and insurance costs are expected to remain elevated for some time, adding pressure to businesses and households alike. These costs will flow through the economy and continue to influence inflation.”
Pask says some of the economic assumptions underpinning current forecasts may prove to be overly-optimistic.
“Treasury’s Budget forecasts point to inflation falling back strongly over the next 18 months and the Government returning to surplus earlier than previously expected. However, these outcomes rely heavily on international conditions continuing to improve.
“With inflation expectations remaining elevated and financial markets already pricing in further OCR increases, there is a growing possibility that interest rates will need to move higher.”
Pask says uncertainty surrounding future regulation and infrastructure investment decisions ahead of the next general election is also weighing on confidence.
“Businesses value certainty when making investment decisions. The cost of delaying, deferring or cancelling infrastructure projects can be substantial, both in terms of direct costs and lost economic benefits.
“Given the fluid international and domestic environment, forecasts on economic growth, inflation, interest rates and unemployment should be treated with caution. The outlook remains highly dependent on developments offshore over the coming months.”
The BusinessNZ Economic Conditions Index (ECI) is a measure of some of NZ’s key economic indicators. It sits at -1 for the June 2026 quarter, down 13 points on the previous quarter, but up 1 point on a year ago. An ECI reading above 0 indicates that economic conditions are generally improving overall; below 0 means economic conditions are generally declining.
The full Planning Forecast for the June 2026 quarter is available now at www.businessnz.org.nz.
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