Real GDP growth

IBISWorld forecasts real GDP to rise by 1.5% in 2025-26, to $291.8 billion. According to the Reserve Bank of New Zealand's (Te Putea Matua) October 2025 Monetary Policy Review, New Zealand's inflation is expected to fall to the 2% target by the first half of 2026, supporting real GDP growth. An expected decline in inflation and substantial spare capacity in New Zealand's economy have prompted the RBNZ to cut the Official Cash Rate (OCR) by 50 basis points to 2.5% in October 2025. Lower rates will stimulate consumer spending and investment, supporting the economy and real GDP expansion.

New Zealand's GDP has increased over the past five years. A low cash rate environment until early 2022 placed downward pressure on the general level of interest payments in New Zealand. These factors have led to more significant household consumption expenditure, which, coupled with greater government expenditure, has aided economic growth over the past five years. However, annual inflation reached 7.2% in 2022, driving the RBNZ to raise the OCR several times over 2022-23. The RBNZ'S efforts to control inflation by raising the OCR from 25 basis points in September 2021 to 550 basis points in May 2023 have curbed further increases in real GDP over the past five years and contributed to a dip in real GDP in 2024-25. As inflationary pressures eased and the economy softened, the RBNZ cut rates several times since September 2024. The lower rates will support consumer spending, stimulating the economy and strengthening real GDP growth.

Exports have risen over the period, thanks to strong overseas demand for New Zealand produce, such as dairy products and wine. The duty-free access of most New Zealand dairy products to China since 1 January 2022, alongside the New Zealand-China Free Trade Agreement (FTA) upgrade in January 2024, has contributed to export growth over the past few years. Moreover, the New Zealand-European Union Free Trade Agreement (NZ-EU FTA) came into force in May 2024, supporting dairy and beef export growth. Expanding exports have further boosted GDP growth over the period. Despite these strong indicators, the pandemic and associated restrictions constrained growth. For instance, international travel to New Zealand plunged in 2020-21 and remained considerably low in 2021-22. The drastic drop in international tourists visiting New Zealand has limited the country's real GDP growth. As borders eased in 2022-23, New Zealand's tourism sector rebounded, resulting in a robust recovery in tourism earnings over the past few years. Notably, New Zealand's Ministry of Foreign Affairs and Trade highlighted travel export revenue rising above pre-pandemic levels in the March 2025 quarter, thanks to higher spending per visitor.

Global economic conditions have also hit GDP, with slowing economic growth in China, partly due to tightening credit conditions. For instance, the challenging economic conditions in China have reduced consumers' spending on imported meat products, adversely impacting New Zealand's red meat exports in 2022-23. The Russia-Ukraine conflict has also created volatility in global markets. These uncertainties have weighed on consumption and investment decisions, limiting growth in real GDP. However, following declines in 2020-21, private capital expenditure recovered strongly in the two years through 2022-23. Still, constrained spending in New Zealand's construction sector and the public sector's fiscal restraint have weighed on total capital expenditure over the two years through 2024-25, limiting real GDP expansion. Overall, IBISWorld forecasts real GDP to increase at a compound annual rate of 2.1% over the five years through 2025-26.