Source: Radio New Zealand
New Zealand’s economy was recovering before conflict broke out in Iran, Infometrics says. RNZ
New Zealand’s economy was recovering before conflict broke out in Iran, Infometrics says, although it was relying too heavily on growth in the public sector.
But it now faces disruptions for the next two years.
The economics consultancy has released its latest update on regional economies.
Provisional estimates from the Infometrics Quarterly Economic Monitor suggest economic activity rose 0.7 percent in the March quarter, and 0.4 percent over the year.
“The March 2026 quarter showed further widespread economic recovery, with 12 out of 16 regional economies expanding,” said Infometrics principal economist Nick Brunsdon.
“We were seeing further improvements in GDP around much of the country, but we were still seeing pretty weak employment.
“South Island employment growth continues broadly unabated, in contrast to the top of the country where Waikato was the only North Island region that didn’t face employment declines this quarter.
“We’re still seeing jobs being lost, particularly in construction … things weren’t perfect before the Iran war, and with the implication of higher oil prices and how that flows through everything, we’re expecting that to push recovery further out.”
He said activity was centred on a group of “high-growth regions” that grew at a rate of more than 1 percent in the quarter. That included Bay of Plenty, Waikato and much of the South Island.
“Strong primary sector returns are certainly helping, though recovery has become relatively broad based, with more industries expanding.”
He said primary sector activity was upbeat, which helped provincial economies.
“Prices for dairy, meat and horticultural exports have eased back a touch, but remain elevated. Milk solid production has lifted 4 percent per year, boosting GDP in the regions. However, farmers are also about to bear the brunt of higher costs for fuel, fertiliser, and plastics stemming from the Iran war.
“The challenge is that just because farm returns are up, it doesn’t necessarily mean that they need to employ more people on the farm, and so we are still seeing employment recovery lagging the broader economic recovery.
“I think the other interesting angle is that when we look at the industries that are driving growth, number one, two, and three are all sort of public sector, population-based industries, health, education, public administration, and that’s great if those things are growing, and that means that you can get better service at your local hospital, but that’s not really the underlying economy. That is us serving our own local needs, it is still taking a while for the private sector to really kick off. You can’t expect your public sector to continually drive your economic growth.”
The impact of the Iran conflict started to be felt towards the end of the period.
Brunsdon said broader business and household confidence was dented as fuel costs rose and expectations for an economic recovery have been pushed out, once again.
Marketview card spending data showed a 0.3 percent lift in retail spending in the March 2026 quarter compared to a year earlier. Early signals suggested that higher prices for fuel were being paid for by reducing overall fuel use, and with reductions in spending on apparel and hospitality.
“Softness in construction and manufacturing continue to hold the economy back, with continued higher input costs like energy, restrained demand, and work ongoing to determine what the new normal looks like for these industries,” Brunsdon said. “These two industries have an outsized impact on the economy, being the second and third largest industries for employment.”
He said the big question for the economy would be how long the disruption lasted.
“If we take what’s happened so far with the Iran war and the oil price shock that’s come through, we expect that oil price shock will have reverberations for two years or more, because it takes time for it to flow through to products that use oil an transport, bringing goods to supermarkets, and then it keeps echoing through as it knocks up the prices of other things and then dampens demand for those things as well.”
He said, at a national level proposed public sector job cuts were not enough to change the direction of the ecconomy but it would be different for Wellington.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
Original source: https://nz.mil-osi.com/2026/05/21/iran-war-could-affect-nz-economy-for-two-years-infometrics/