What’s ahead for New Zealand’s economic recovery? Insights from Jarrod Kerr, Chief Economist at Kiwibank

Two weeks ago, we had the pleasure of welcoming back Jarrod Kerr, Chief Economist at Kiwibank, to our office for an insightful update on New Zealand’s economic outlook.

After several years of disruption and economic pressure, it was encouraging to hear a cautiously optimistic view of what lies ahead for 2025.

Here are key takeaways from our session with Jarrod Kerr:  

1. The Goldilocks moment

New Zealand’s economy appears to be entering a more stable phase, with economists forecasting modest but sustainable growth of 2-3% moving forward. The current interest rate environment has reached what many describe as a “Goldilocks level” around 3% – not so high as to stifle growth, yet not so low as to fuel inflation.

2. Cost of living relief

The prolonged cost of living crisis that has gripped New Zealand consumers for three years appears to be easing. Inflation has dropped below the average wage increase rate, providing much-needed relief to households. This development, combined with expectations of further interest rate cuts, creates a positive tailwind heading into the next year.

3. Mortgage market dynamics favour quick recovery

Unlike the 2008 financial crisis, New Zealand’s mortgage structure today positions the economy for a faster recovery. A significant 81% of mortgages are fixed for less than a year, with 60% coming off their fixed terms within 6-9 months. This contrasts sharply with 2008, when 60% of mortgages were locked into two-year fixed rates, prolonging the economic downturn. The current structure means interest rate cuts will feed through the economy within 6-9 months, which will hopefully shift optimism more quickly.

4. Signs of recovery

Despite current challenges, there are encouraging signs of recovery:

• Tourism is rebounding strongly.
• IT, data and digital sectors are showing momentum.
• The housing market is stabilising.
• Financial institutions are increasing their support for small and medium enterprises.

These developments point to renewed economic activity across key sectors and growing business confidence. Growth is expected to accelerate from the end of this year.

5. The productivity imperative

One theme came through clearly: New Zealand must invest in productivity to capitalise on the improving economic environment. With a more stable foundation emerging and interest rates providing supportive conditions, the focus must shift from survival to strategic growth and productivity enhancement.

The consensus suggests that while New Zealand has weathered a challenging period marked by COVID-19 disruption and subsequent cost pressures, the economy is now positioned for a measured but meaningful recovery.

After a tough few years, it was energising to hear this perspective and reflect on the opportunities ahead. 

A big thank you to Jarrod for sharing his insights so generously, and to everyone who joined us for our breakfast session hosted by Consult Recruitment & LEAD Executive Search.

Missed out on this breakfast session? Follow us on LinkedIn to stay updated on future events, or reach out if you’d like to be part of the next one: info@consult.co.nz

Thanks from the team at Consult Recruitment.