Short points, quick returns. A collection of themes and talking points.
The global backdrop
From the International Monetary Fund: “The global economy is adjusting to a landscape reshaped by new policy measures. Some extremes of higher tariffs were tempered, thanks to subsequent deals and resets. But the overall environment remains volatile, and temporary factors that supported activity in the first half of 2025 - such as front-loading - are fading. As a result, global growth projections in the latest World Economic Outlook (WEO) are revised upward relative to the April 2025 WEO but continue to mark a downward revision relative to the pre-policy-shift forecasts. Global growth is projected to slow from 3.3% in 2024 to 3.2% in 2025 and 3.1% in 2026, with advanced economies growing around 1.5% and emerging market and developing economies just above 4%. Inflation is projected to continue to decline globally, though with variation across countries: above target in the United States - with risks tilted to the upside - and subdued elsewhere.”
Playing Switzerland
Amidst the argy-bargy between China and the USA, remember two figures. The first is $17 billion our exports to China. The second is $9.5 billion our exports to the USA. They are our two top trading partners.
GDP per capita is down
New Zealand’s real (inflation adjusted) GDP per capita has declined 5% in the past three years. Inflation has underpinned an 11% rise in nominal GDP per capita but you’re not going forward if inflation is eating up your money. The 5% decline represents a fall in living standards and takes some getting used to.
Turning the corner
There were 3,747 new homes consented in New Zealand in September 2025 up 27% compared with September 2024. When seasonal effects are excluded the number of new homes consented in September 2025 rose 7.2% compared with August 2025.
Net migration
We saw an annual net migration gain of 10,600 compared with a gain of 51,600 last year. Migrant arrivals were 138,600 (down 16%) and migrant departures were 127,900 (up 13%).
In a slower lane
Population growth slowed in all of NZ’s 16 regions in the year ending June 2025. This was led by weaker migration. NZ’s resident population grew 0.7% in the year ending June 2025 to 5.3 million people. This growth was slower than in the year ending June 2023 (2.3%) and June 2024 (1.7%). Canterbury was the fastest growing region in the June 2025 year (1.1%), followed by Auckland and Waikato (each 1.0%).
Housing demand relative to supply
Housing demand is driven by population growth which is around 35,000 people. Divide that by 2.5 people per house and add an allowance for depreciation on the housing stock and housing demand is around 15,000-20,000 units. Building consents are running in excess of 30,000 units. There’s ample supply so rents aren’t accelerating.
Is it really that bad?
Construction is doing it tough, with building consents receding from 50,000 to 34,000. However, a sense of perspective is needed. We’ve come off highs and not hit lows. Residential building consents per 1,000 residents are in line with the historical average since 1966 which is just above six. We aren’t in the global financial crisis era, where they fell below 4 per 1,000 residents for three years in a row.
Going nowhere for now
The seasonally adjusted REINZ House Price Index was unchanged (0.0% m/m) in September following a 0.1% m/m increase in August. Seasonally adjusted sales volumes remained close to their long-run average, while median days to sell dropped from 45 to 44 but remain elevated.
Still projections of an uplift
Expectations for house price growth are around 5% over 2026, supported by the OCR reaching 2.25% by the end of the year. That is a modest housing upturn by historical standards - somewhat reflective of valuations (still expensive), the supply/demand situation and a focus on deleveraging.
Where to for interest rates
From the RBNZ: “On balance, the Committee reached consensus to reduce the OCR by 50 basis points to 2.5%. The Committee remains open to further reductions in the OCR as required for inflation to settle sustainably near the 2% target mid-point in the medium term.”
The market is anticipating a 2.15% terminal OCR which means 35 basis points of potential OCR cuts in the coming six months.
Insurance movements in the past year
- Life insurance 0.6%
- Dwelling insurance 5.6%
- Contents insurance. 9.3%
- Health insurance 19.2%
- Vehicle insurance -0.8%
Administrative inflation
Headline inflation is 3%. Administrative inflation courtesy of local and central government charges is up 8.4%. The more money that gets siphoned up in local and central government charges, the less money available for spending in other parts of the economy. It’s a simple substitution effect.
A different recovery
The historical playbook for economic recoveries have centred around lower interest rates stimulating interest sensitive parts of the economy. The Auckland property market is normally one of those that leads the way. The recovery underway is rural rather than Auckland driven. It’s an earnings recovery as opposed to a spending-led recovery. Compared with the September 2024, in September 2025 goods exports rose by $928 million (19%) to $5.8 billion. Leading the way is dairy (milk powder, butter and cheese) up 27% and meats and edible offal up 24%. Commodity prices and the low NZD/USD have helped.
A rural injection
As part of the divestment of its brands, Fonterra has promised its farmer shareholders a capital return of NZ $2/share, adding up to approximately $3.2 billion. This is around 0.7% of GDP. Cue more of a rural led recovery.
Tractor sales
Tractor registrations were up 13% in September 2025 compared to September 2024. While tractor sales are coming off a low base, it’s another sign that we’re starting to see a different sort of recovery being led by the regions.
This from Port of Auckland CEO Roger Gray via Linkedin: “Yesterday we saw more evidence that the economy has turned… in the RORO terminal we had tractors, tractors, tractors everywhere... October has also been one of the busiest in the container terminal since 2015.”
Currency gyrations
One factor behind the rural economy has been the NZD/USD which sits in an export friendly zone. We’ve recently seen movement in another currency, namely the NZD/AUD which has fallen below 0.88 after spending a considerably amount of time above 0.90. This will assist exporters into Australia but dents purchasing power when holidaying across the ditch.
Tourism still recovering
Tourism is at 87% of pre-Covid levels. We’re around 400,000 tourists short which has taken out some spending power. Queenstown bucks the trend with international arrivals into the airport at 130% of pre-Covid levels.
Consumer confidence still weak
According to ANZ-Roy Morgan consumer confidence fell slightly from 94.6 to 92.4 in October which is a low level. The proportion of households thinking it’s a good time to buy a major household item (the best retail indicator) fell from -11 to -14. This indicator hasn’t been positive in more than four years.
The cheque is in the mail
The OCR might have fallen 250 basis points but mortgage holders so far have seen 94 basis points of benefit. The yield on loans has gone from 6.4% to 5.5%. A key reason for the delay is the impact of having a fixed mortgage. With around 70% of mortgages to refix in the coming year monetary policy is taking time to diffuse through the economy.
Bank non performing loans (NPLs)
NPLs are reported at 0.7% of total loans which is a healthy low number. It doesn’t show excessive stress. However there’s another interpretation. It’s a sign banks have been taking very little risk relative to the pricing (margin) being charged.
It’s easy to point the finger at government during tough times and we often do
Yet there are some major listed companies that have recently destroyed a lot of shareholder value over time. Perhaps it’s time we turned from the Mood of the Boardroom (which is a survey run by NZME) to the Performance of the Boardroom. Minus 0.3%. That’s the average decline in capital productivity per year since 1996. The overarching trend is we build stuff and mismanage it.
A capital gains tax
The Labour party has proposed a narrow capital gains tax (CGT) focused on residential and commercial property outside of the family home. The IMF and OECD have been recommending a CGT for years which most other countries have. Contrary to the views of the government, it won’t wreck the economy and life will go on. The narrow-based CGT proposed needs to be eyed with consideration as to what could’ve been put on the table in the form of a wealth tax or other taxes.
Sick of teacher striking?
Has teacher pay kept up with inflation? Back in mid-2015 a step 1 (referred to as T1 or G1E-G2E) trained secondary teacher’s base pay was $45,068. This had risen to $61,329 by December 2024, a rise of 31.3%. Another adjustment is around the corner. The top of the salary scale (step 10 or T10) in mid-2015 was $73,000. That is now $103,086, a rise of 41.2%. The ceiling has been raised, and faster than inflation. Inflation has risen 34.7% between mid 2015 and now, or 31.5% between mid 2015 and the end of 2024 (the last pay rise for teachers).
A big portfolio to manage
Will new councillors get it right and understand the portfolio management challenges they face? As at the end of June 2024 councils reported assets of $227 billion equivalent to 57% of new Zealand’s gross domestic product (GDP). Infrastructure assets were $150 billion (two-thirds), land and buildings $40 billion, investments $17.2 billion, cash and bank deposits $2.3 billion and other fixed assets of $7 billion. Those are sizable portfolios to manage.
Long-term fiscal challenges
In the 1960s there were around seven New Zealanders aged 15–64 for every person aged 65 or older. Today there are four. By 2065 the ratio is projected to fall to two. If NZS and Health take up an additional share of the economic pie, then something has to give. NZS is projected to go from 5.3 to 7.8% of GDP and health from 7.1 to 9.9% of GDP. This is combined resource reallocation of 5.4 percentage points of GDP. Healthcare costs rise with age. For someone in the twenties that (taxpayer) cost is $2,000-2,500. For someone in the forties, $3,000. For someone 65-69 the average cost is $5,300; 70-74 it is $6,300 and by age 75-80 it rises to $9,000. Then it starts getting exponential rising to $28,400 for someone aged 90+ with aged care 57% of that cost.
According to the Treasury, “There are choices to be made as to the future New Zealanders want. The choice facing New Zealanders is what legacy we want to leave to future generations.”
Interesting fact
The population aged 65 plus holds approximately 38% of household wealth or around $780 billion.
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