Source: Kiwibank
3rd September, 2026
New Zealand’s economic recovery is slowly gaining ground, but not fast enough for many households and businesses.
Kiwibank’s latest Regional Score found economic conditions improved modestly across the country in 2026, but many regions remain some way from a meaningful rebound.
South Island economies continue to outperform the North. Queenstown topped the rankings with a 9 out of 10 “feels-like” score, followed by Southland and Otago (7) – while Taranaki (3) and Wellington (3.4) sat near the bottom of the table.
The report shows a persistent divide between the two islands, with the South Island recording an average regional score of 5.1 compared with 4.0 in the North Island.
Kiwibank Chief Economist, Jarrod Kerr, says the figures highlight a recovery that is gaining traction in some regions but remains frustratingly slow for many New Zealanders.
“The economy is improving, but it’s doing so at different speeds across the country. Tourism-heavy and agricultural regions in the South Island are leading the way, while many households and businesses in the North are still feeling the pressure of weak demand, higher costs and economic uncertainty.”
Tourism and agriculture continue to drive stronger performance in the South Island, particularly in Otago, Canterbury and Southland. Queenstown remains a standout performer, supported by strong visitor numbers, low unemployment and ongoing demand in the housing market.
At the same time, many North Island regions continue to face softer business conditions. Auckland’s economy remains subdued, while Wellington businesses report holding back investment decisions amid economic and political uncertainty.
The divergence is particularly evident in labour market data. North Island unemployment averages around 6%, compared with 3.7% across the South Island. Underutilisation, which includes both unemployed and underemployed workers, remains elevated nationally at 13.8%, with Northland recording one of the weakest outcomes.
Kerr says, “The labour market tells the story clearly. Many households are finding it difficult not just to secure work, but to secure enough hours and income. That’s especially true in parts of the North Island.”
Property markets also reflect the regional split. While national house prices have largely moved sideways over the past three years, Otago and Southland have outperformed. House prices in Auckland and Wellington remain well below their post-pandemic peaks.
Despite the subdued conditions, Kiwibank expects the recovery to strengthen through 2027. Lower interest rates, improving agricultural incomes and another strong tourism season are expected to support economic activity, particularly across regional New Zealand.
“The good news is that the foundations for stronger growth are in place and the direction of travel is positive. Tourism is rebounding, commodity prices remain supportive and lower borrowing costs should help lift activity over the coming year.
“While the recovery remains uneven, we expect economic momentum to strengthen and become more widely felt across New Zealand through 2027,” Kerr concludes.
Key findings
- Queenstown ranked as New Zealand’s strongest performer in 2026 with a “feels-like” score of 9 out of 10.
- Southland and Otago ranked second with a “feels-like” score of 7.
- Wellington (3.4) and Taranaki (3) were among the weakest-performing regions.
- The South Island’s average regional score was 5.1, compared with 4.0 in the North Island.
- North Island unemployment averaged 6%, compared with 3.7% in the South Island.
- National underutilisation remains elevated at 13.8%.
- Tourism, agriculture and manufacturing are outperforming, while construction, retail and discretionary services remain under pressure.
About Kiwibank’s Regional Score
Kiwibank’s Regional Score combines seven economic indicators across 13 regions, including population growth, retail sales, employment, unemployment, house prices, house sales and building consents. Scores are presented on a scale of 1 to 10. Scores for 2026 are based on an updated methodology and are not directly comparable with previous years.